Poland - Economic analysis of government's policies, investment climate and political risk.






POLAND: Economic Policy Analysis

This site presents an analysis of the Polish government's economic policies compared to a list of 34 economic policies as prepared by student Albert Knuth with the McKeever Institute of Economic Policy Analysis (MIEPA) in the Fall of 2004. To read the analysis scroll through this site. To learn more about the background policies, click here

Introduction and Policy Recommendations

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Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Poland is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 1996. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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Comparison of Poland's economic policies to MIEPA criteria as prepared by native student of Poland, Mr. Albert Knuth, studying in San Francisco in Fall 2004.



      1               3.0            9.0             15.0        60%

      2               5.0           15.0             15.0       100

      3               3.8           11.4             15.0        76

      4               4.0           12.0             15.0        80

      5               4.6           13.8             15.0        92

      6               4.7           14.1             15.0        94      

 	7               3.0            9.0             15.0        60

      8               4.3           12.9             15.0        86

      9               3.6           10.8             15.0        72

      10              4.5           13.5             15.0        90

      11              4.0           12.0             15.0        80

      12              3.4           10.2             15.0        68

      13              4.0            8.0             10.0        80

      14              5.0           10.0             10.0       100

      15              3.8            7.6             10.0        76

      16              4.4            8.8             10.0        88

      17              2.5            5.0             10.0        50

      18              4.9            9.8             10.0        98

      19              3.8            7.6             10.0        76

      20              3.5            7.0             10.0        70

      21              4.0            8.0             10.0        80

      22              5.0           10.0             10.0       100

      23              3.8            7.6             10.0        76

      24              4.2            8.4             10.0        84

      25              3.0            6.0             10.0        60

      26              3.0            6.0             10.0        60

      27              3.9            7.8             10.0        78

      28              4.5            9.0             10.0        90

      29              3.0            3.0              5.0        60

      30              4.8            4.8              5.0        96

      31              4.5            4.5              5.0        90

      32              4.1            4.1              5.0        82

      33              5.0            5.0              5.0       100

      34              3.8            3.8              5.0        76           

  TOTAL             136.4          295.5            375.0       78.8%
                    =====         ======           =====        =====
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1 Freedom from internal control: Rating 3.0

Overall citizens in Poland are free from positive or pro-active control by government agencies. People are free to move about and take on any activity that is not against the law. There can be however a lot of bureaucratic red tape when trying to open a business and depending on the area and nature of the business, government officials might have to be bribed in order to speed up otherwise deliberately sluggish permit procedures. Nevertheless, it is easier to open a business in Poland than in some Western European countries, as Poland is trying to attract investment and entrepreneurship. In comparison to the United States however, citizens in Poland are definitely less free from internal control and the Poland could use some deep-reaching reforms to clean up its bureaucratic machinery.

Sources: Personal Information

2 Freedom of speech: Rating 5.0

Polish people are able to express themselves freely without censorship or restriction. Their freedom of speech is protected by the constitution and cannot be manipulated in any way or manner. The press and the people attach a lot of importance to this right as it has been taken away from them for 40 years (until the early 90?s), prior to the fall of communism. The free press, television and radio practice critical journalism and scrutinize closely on the government, business activities, social changes and so on. Hence, Poland receives a high rating in this category.

Sources: Personal Information; Poland.gov (accessed through: www.poland.gov.pl)

3 Effective, fair police force: Rating 3.8

The police force in Poland went through a lot of change and reform since the early 90?s. Poland?s police had to rid itself from a bad reputation of being the right hand of the politburo and had to go through extensive reforms which followed after numerous corruption scandals went public. Today, the police force is not only better equipped and much less prone to corruption, but it also attracts prospect police officers which come from a generation of poles who grow up in a free democracy and have more respect towards citizen?s rights and the law. However, the police still have to overcome many shortcomings, which range from corruption to low effectiveness and low moral. Some of it has to do with the police force still lacking sufficient financial support. Furthermore, many poles still distrust anybody who is an agent of the government in general, a condition which stems from the fact that poles have been oppressed for 40 years by their government.

Sources: EUbusiness.com (accessed through:www.eubusiness.com)

4 Private property: Rating 4.0

Private property is protected by law and the government has no right to infringe on that right, unless of course the property has been obtained by legally questionable means. Property rights in Poland are just as strong and established as in any other country of the European Union. Poland however has been protecting some of its real estate from foreign buyers, as it was trying to protect land along the Baltic coast for instance, from being bought up completely by wealthy buyers from Western Europe. That way, many poor farmers were unable to sell their valuable land immediately because there were not enough polish buyers with sufficient capital, and foreigners were restrained from buying land. The effect has been especially positive in many tourist areas of Poland. Young people in farming families found incentives to stay in their home towns and change their family farms into campgrounds and earn enough money to feed their families and to reinvest it into their properties. Now, much of the Baltic coast has become prosperous, the campgrounds changed into vacation homes, small farm houses into estates and the land is still owned by the same people who have been living there for many years.

Sources: Personal Information

5 Commercial banks: Rating 4.6

Poland has a well-developed financial services system with both, private and federal banks, national and international. Banks activities in Poland range from corporate and institutional services,to investment banking, foreign trade operations, custodial services, retail banking and many other related financial services. The largest bank monopoly in Poland Bank Pekao is well on its way to complete privatization and today Poles have a variety of banks to choose from.

Sources: Personal Information; www.business.com

6 Communication systems: Rating 4.7

An extensive network of communication facilities - telephone, TV, radio, FAX, newspapers, magazines, computer networks et cetera exists in Poland and makes it easy for everybody to communicate efficiently. The changes since the 1990?s have been tremendous and with the spread of cellular technology and High-Speed internet Poland shows little to no difference in its communication systems as other European Countries. The entire phone system in the country has been rebuilt. Today, a phone call from overseas to a remote area of Poland sounds just as good as a local phone call in any city in the US. Ten years ago one would have to spend an hour to even get connected from the US to Poland, and even when a connection was finally made, the quality of the phone call would have been terrible.

Sources: CIA World Factbook (accessed through:www.cia.gov); Personal Information

7 Transportation: Rating 3.0

High-quality transportation is available for Poles and commercial activity can be sufficiently moved form one place to another. Problems do exsist however in the road, rail and air systems. All three transportation systems, even though much improved since the collapse of communism, are still not quiet up to the same standards as for instance Germany and France. Poles still have to endure outdated trains which in addition are chronically late. Highways and streets, even though also much improved, are still damaged and unsafe, especially in areas away from large cities. Airports are not available in all large cities and most International flights go only to Warsaw. Poland also only has about 122 airports, whereas Germany for instance has over 500. Overall, Poland?s score in this category will be fairly low.

Sources: CIA World Factbook (accessed throguh:www.cia.gov); Personal Information

8 Education: Rating 4.3

The education system in Poland is good. The literacy rate is at 99.8% for the whole population (male: 99.8%; female: 99.7%, 2003 est.) As a matter of fact Poles have the right to free education, including higher education at an University. Polish children are required to learn a second language and they score higher in mathe, reading and the sciences, accordign to the Pisa study. However, since many school buildings are still from communist time, polish children often do not enjoy modern facilities, as their european counterparts do in Western Europe.

Sources: CIA World Factbook (accessed throguh:www.cia.gov); Personal Information

9 Social Mobility: Rating 3.6

Poles are able to advance in earning capacity, regardless from which group or class they come from. However, most Poles, opposite to Americans, do not believe they everybody can become wealthy and successful by their own means. Poles oftentimes hold the belief that it matters a lot who one knows and what status ones family has in regards to a persons ability to become successful in Poland. That is not uncommon amongst Europeans however and true to some extent. For instance: generally it is much easier in the United States to find work, then move on to college and become educated and successful. In Poland the unemployment rate is very high, well paying part-time jobs are often unavailable and only Poles who have been successful in high school and choose the preparatory path for higher education are allowed to go to a university.

Sources:Social Mobility in Europe (accessed through: book; ISBN 0199258457); Personal Information

10 Freedom from outside control: Rating 4.5

Poles are subjects to the Polish Constitution and the Polish Common Laws. There are also provisions from the European Union which all citizens of the EU have to abide to. Otherwise however, Poles are completely free from outside control

Sources: Personal Information

11 Foreign currency transactions: Rating 4.0

Only the domestic currency is allowed for trade within the country and foreign currencies have to be converted. This did not used to be that way and especially in the years directly preceding the collapse of communism, the dollar and the German mark where used in most business transactions. Today this has changed, the zloty has strongly appreciated in value and the majority of people value it as a strong and valid currency.

Sources: Warsaw Business Journal (accessed through: www.wbj.pl)

12 Border Control: Rating 3.4

Since Poland has joined the European Union earlier this year (2004), it also became the border of western Europe. Mainly it now became the western border to countries like Ukraine, Belarus, Lithuania and Russia, countries which citizens used to be able to travel to Poland simply by showing a passport, but now need to meet immigration and visa requirements. For that matter, Poland is being supplied by the European Union with modern equipment (Vehicles, Weaponry, Night Vision equipment etc.) to be better able to do its job. But Poland is also a transit country for drugs coming from Russia,and smuggled and stolen goods coming from western Europe and going to Russia. Here Poland still has to improve its workings in regard to border control, as corruption and bribery amongst border control guards are almost an accepted way of "getting things done." However, being under the tight supervision of the European Union and having adopted an important role in border protection, one can hope that over time the situation will get better.

Sources: Personal Information; The Herald Tribune (accessed through: www.iht.com)

13 Currency: Rating 4.0

Poland has a single currency throughout the country, which is the official and government approved Zloty. Looking at following numbers, one can see that the polish currency has become stronger in relation to the dollar in the past years. The zloty per US dollar changed from 1999 ? 2003 as follows: 3.8891 (2003), 4.08 (2002), 4.0939 (2001), 4.3461 (2000), 3.9671 (1999). Even though this is generally a good sign, it can also be a call for concern, as Poland?s economy is highly export driven and a steep rise of the zloty could lead to diminished buying power from importing countries and hence reduce exports. Overall however the zloty is a strong currency and is fairing really well since the fall of communism.

Sources: CIA World Fact Book (accessed through www.cia.gov); Forbes Magazine (accessed through: www.forbes.com)

14 Cultural, language homogeneity: Rating 5.0

Poland is a culturally very homogenous country, with Poles making up 96.7% of the population (German 0.4%, Belarusian 0.1%, Ukrainian 0.1%, other 2.7% (2002)). In regards to religious homogeneity it can be said that Poland is mainly catholic Roman Catholic 95% (about 75% practicing), Eastern Orthodox, Protestant, and other 5%). Polish is the official language of the nation and Poles show great pride to preserve their language, heritage and culture. Cultural differences are very small and even differences within regions in Poland (in regards to culture and heritage) are little. However, many regions have their own specific customs and dialects, which only add to the richness of polish culture.

Sources: CI

15 Political effectiveness: Rating 3.8

Poland?s government is effective, relatively to the historic problems it has to overcome and issues to resolve. By historic problems one should think about 40 years of an inefficient and corrupt bureaucracy and political elite, whose inefficiency and influence is still an issue to be dealt with to this day. In other words, even though Poland has proved itself to be able to move into the direction of becoming a prosperous and democratic nation embedded in the European Union, it still has to fight against negative influences in its government, which hinder polish progressivism. As will be discussed later in the section about Honest Government, it is clear that especially corruption still plays a major role in politics, slowing down effectiveness. However, regional policies in Poland, aimed at the redevelopment of local districts, regions and cities, have shown to be an effective tool to successfully apply self-reliance from state government, which gave local municipalities more responsibilities and ultimately increased their effectiveness. Furthermore, compared to 40 years ago, polish political figures are showing a great deal of effectiveness in changing the country to the better (i.e. Lech Walesa, Alexander Kwasniewski)

Sources: Personal Information; Encyclopedia Britannica (accessed through: www.britannica.com)

16 Institutional stability: Rating 4.4

Speaking of the stability of Eastern European countries, Stanley N. Katz, senior fellow in public and international affairs at Woodrow Wilson School at Princeton and president of the American Council of Learned Societies said that Poland has the best chance of any of the Eastern European countries of developing a stable environment, both, politically and economically. Indeed, Poland shows strong signs that it is focused on institutional stability by trying to fight corruption, reforming the banking system and concentrating on fiscal policies which will bring long-term macroeconomic stability.

Sources: tiscali.europe (accessed through: http://europe.tiscali.co.uk); The Daily Beacon (accessed through:http://dailybeacon.utk.edu)

17 Honest Government: Rating 2.5

For a country joining the ranks of the European Union, Poland has substantially too many problems with corruption. A lot of this problem has been caused by the ?Compromise of 89,? which was essentially an agreement between the communist government and the opposition, dissolving the communist party but pushing many of the powerful Politburo members into key positions. Many scandals become public and a recent poll found that 91 percent of Poles believe the threat of corruption in their country is "very high" or "rather high," and that 71 percent think senior government officials reap unwarranted benefits from holding public office. Much of that attitude stems from people actually experiencing corruption in their lives often. It is well known and sadly often customary to bribe police men, customs officers, building inspectors and others, in order to avoid problems or to speed up bureaucratic processes. Even though corruption will probably decline over time as business and politics untangles, the old garde which still pulls strings in government will slowly vanish, and as the Polish government will be under the scrutiny of the European Union. However, currently it is still a major problem, especially because the polish people have little or no trust in politics and foreign investors might get discouraged to deal with corrupt systems.

Sources: Personal Information; WarsawBusinessJournal (accessed through: www.wbj.pl)

18 Common laws: Rating 4.9

Poland has the same set of non-conflicting laws, justice and dispute resolution throughout the country. It guarantees, among other things, freedom of speech, freedom of religion, the right of assembly, the right to organize and to strike, the rule of being innocent until proven guilty and the right of habeas corpus, as well as the right to move within the country or outside the country at will. Everyone is guaranteed equality under the law; no one can be discriminated against in political, social or economic life. The constitution is also supposed to guarantees free healthcare and education, a minimum wage and a range of other social provisions.

Sources: Personal Experience

19 Central Bank: Rating 3.8

After 1989 seventy licenses were issued to private banks, cooperative banks and foreign banks. Furthermore the privatization of the Export Development Bank began in 1991, and legislation was introduced to allow private individuals, to form banks as limited stock companies. Now the National Bank of Poland is the central bank and its tasks are set in the Polish Constitution, the Act on the National Bank of Poland and the Banking Act. Today the main goal of the National Bank?s activity is to maintain price stability and under a responsible monetary policy, to stabilize the inflation rate at a level of 2.5%. This is especially important now, since Poland joined the European Nation and has to follow monetary guidelines regarding its currency, inflation rate, debt ratio etc. Furthermore the National Banks future policies will be essential in order to meet the Maastricht standards for Poland?s admission to the EURO zone.

Sources: Forbes magazine (accessed through: www.forbes.com); Financial Times (accessed through: www.ft.com)

20 Domestic budget management: Rating 3.5

The polish government spent $48.64 billion (including capital expenditures) and collected $39.13 billion in revenues. Poland?s debt accounts to approximately 47.4% of GDP and inflation is currently at approx. 4.3%, compared with the European central bank's target rate of 2.5 %. This ultimately results in Poland?s relatively low rating of 3.5. However, Poland?s inflation is declining and the country is still believed to meet the norms for a steady long-term interest rate and stable inflation levels of the Maastricht Treaty within the next two years, allowing the country then to adopt the EURO.

Sources: EU-Business Online (accessed through: www.eubusiness.com); CIA World Fact Book

21 Government debt: Rating 4.0

Poland?s government debt made up 47.4% of GDP in 2003. Compared to US (62.4%) and Germany (64.2%). Poland?s debt is of good standing; however there are forecasts that the ratio of public debt to GDP will exceed 55% of GDP in 2005. At such relatively high levels of the public-debt-to-GDP ratio, the Polish government is under legal pressure to further tighten fiscal policy in the short term to meet not only public finance law, but also EU membership requirements (EU limit is 60%). Furthermore, the 2005 budget deficit of 35 billion zloty represents 3.7% of GDP. However, if compared with Germany, Poland doesn?t look that bad in regards to public debt. Not only did Germany's public deficit violate EU limits in 2002, but its total public debt did as well, with German debt amounting to 60.8 percent of GDP in 2002.

Sources: CIA, The World Factbook, www.cia.gov; Poland Development Gateway (accessed through: http://www.developmentgateway.org)

22 Economic Statistics: Rating 5.0

The Polish Glowny Urzad Statystyczny (GUS), or Central Statistical Office, is the central government agency concerned with gathering statistical data, storing and processing gathered data, publishing, rendering and disseminating results of statistical surveys as official statistics data. The GUS continuously publishes numerous statistics, which are highly accurate. Furthermore there are numerous TV stations, news agencies, independent research companies, universities and private enterprises which make statistical data about economic, social and political factors available to the public.

Sources: Personal Information

23 Protection of public health and safety: Rating: 3.8

The health sector has dramatically improved in Poland since the fall of communism. Even though Poland has still a fairly large problem with alcoholism and smoking, people are starting to become more health conscious. Most people have access to doctors and hospitals and are also able to afford health care, which is partly paid for by the government. However, there are people who do not get medical care which is up to EU standards. This is especially the case in rural areas and in cities which used to be the main producers of steel and coal. The following statistics show a general change towards the better in regards to public health. PL Infant mortality rate: 8.73 deaths/1,000 live births (2004 est.); Life Expectancy: 74.16 years; HIV deaths: 100 (2001 est. US Infant mortality rate: 6.63 deaths/1,000 live births (2004 est.); Life Expectancy: 77.43 years; HIV deaths: 14,000 (2003 est.); Tuberculosis per 100.000: 32.1 (2002 est.) US: 4.9; Germany: 9.7; Europe: 50.7; Infant Mortality/1000 live births went from 62 in 1960 to 8 in 2002.

Sources: CIA, The World Factbook, www.cia.gov; Personal Information

24 High wage policies: Rating 4.2

According to a recent survey of the Warsaw Business Journal, the most important reason for roughly 90% of investors to choose Poland was the relatively low labor cost. However, wages in Poland have been increasing slowly since 2001, primarily due to high unemployment. As a result, the wage level in the Czech Republic and Hungary is now higher than in Poland. Overall however, Poland is able to offer a standard of living equal to most Western EU countries, but it can do this relatively cheaper. In other words, even though wages might be lower than in other European countries, the relatively lower cost of living is partly able to make up for this. This is especially true for young and educated, who are career-oriented and driven, reflecting the patterns of Western Europe. However, for Poles who have families, do not have college degrees and who do not work in professional occupations, the gap between the cost of living and their actual wages can be very high.

Sources: Polish-American Chamber of Commerce; Personal Information

25 Environmental protection: Rating 3.0

Since the collapse of communism in Poland in 1989, solving environmental problems has become one of the top priorities of the Polish government. Before 1989 the Polish communist party blatantly disregarded any measures to protect the environment, making Poland one of the most polluted countries in Europe. The Slask region in the southern part Poland was the back bone of polish coal and steel industry, epitomizing the communist party's emphasis on maximum industrial and economic gains, without any regard for the environment or the health of the polish people. Since then Poland has made great progress in improving its environmental record. After Poland started to introduce democracy and capitalism closed down many inefficient, polluting factories, and new policies promoting environmental protection and energy efficiency have been introduced and continue to be implemented. In 1997, the Polish parliament adopted a new energy law defining the principles for developing a national energy policy. The law was intended to ensure that the Polish government provides efficient and rational use of fuels and energy for the country, taking into consideration environmental protection requirements.

As a result, industrial and agricultural discharges in Poland have been more than halved, and major air pollutant emissions have been significantly reduced. Much of the country's obsolete and inefficient power plants have been retrofitted with pollution prevention equipment in order to cut down on sulfur dioxide emissions. Regulations and legislation governing oil and gas development, as well as coal mining, have been upgraded to include better environmental protection measures. Nevertheless, there is still much room for improvement.

Sources: WBJ; CIA, The World Factbook, www.cia.gov, Personal Information

26 Strong Army 3.0

With its military expenditures at approx. $4.5 billion, Poland ranks 28th on the global scale of nations, and as such it represents a relatively small military force. Poland is steadily increasing its military expenditures and purchasing modern weapons and communication equipment. Just recently (Sep.20th 2003) Poland finalized the purchase 690 of armored, a transaction worth almost $1 billion and which represents one of the biggest arms deals in Europe. Furthermore Poland is putting up the third largest contingent of military personal in the war in Iraq, handling a very complex and demanding military operation.

However, even though Poland?s army is now tied into the EU and the NATO, it still has to overcome its relative inferiority which is largely due to Poland?s 40 years of communism and 40 years of subordination to Soviet Russia. Overall Poland?s army is functioning and improving but it could most likely not withstand a foreign attack by a western power if it would not get the full support of NATO.

Sources: CIA-World Fact Book(accessed through: http://www.cia.gov)

27 Foreign trade impact: Rating 3.9

For 2003: Exports $57.6 billion vs. Imports $63.65 billion = $4.085 billion deficit. Poland imports more goods and services than it imports, thus having to deal with a trade deficit of roughly $4 billion. Poland's Imports and Exports constitute approx. 32% of the country's GDP.

Sources: CIA-World Fact Book (accessed through: http://www.cia.gov)

28 Protection of foreign currency earning enterprises: Rating 4.5

Two departments are at work in Poland to promote foreign direct investments in Poland and to support and encourage polish exports. These institutions are the Polish Agency for Foreign Investment (PAIZ) and the fairly new government agency Pro Polonia. In the future Pro Polonia will merge with PAIZ to create a more streamlined and effective agency. The chief purpose of Pro Polonia will be the support of polish entrepreneurs who want to start their new export ventures. Pro Polonia will act as a liaison between them and polish authorities, helping them to through legal processes and bureaucratic procedures. The agency will be subordinate to the minister of the economy, while the president of Pro Polonia will be appointed by the prime minister.

Sources: Polish Information and Foreign Investment Agency (accessed through: http://www.paiz.gov.pl/index/)

29 Management of Foreign Currency Budget: 3.0

For the year 2003: Export revenues totaled $ 29.9 billion. Import expenditures increased to $ 36.9 billion. A generally lower percentage increase in import expenditures compared to export revenues contributed to a decrease in the trade deficit from the level of USD 7.3 billion in the first three quarters of 2002 to USD 7.1 in the corresponding period of 2003. Even though the trade deficit is still high (approx.10% of GDP), it is gradually decreasing and in 2003 Poland's exports with the EU increased by 8%, where it?s imports increased by only 1%.

Sources: Poland Development Gateway (accessed through: http://www.developmentgateway.org)

30 Layers of collective action: Rating 4.8

Since 1991 Poland is a parliamentary democracy where ultimately the citizens elect their government officials. The president is directly elected for five years and he is the commander in chief of the armed forces, has veto rights on parliamentary decisions and he has substantial influence on the appointment of key members of the military and the department of foreign affairs. The Parliament consists of two chambers: the Sejm, who?s 460 members are elected in proportion to the size of the region they are representing and the Senate, who?s 100 members are elected by a voting system based on majority rule. Furthermore, Poland has regional Parliaments which can make, amongst others, their own financial and budgetary decisions. The smallest form of self government is constituted by municipalities, which represent smaller villages and towns, and which can make important local decisions which do not need to be dealt with by regional governments.

(Source: Personal Experience)

31 Pro business climate: Rating 4.5

Poland's fast growth can be accredited to the growing small and medium business sector. Businesses from this sector also employ much of the workforce which lost their jobs from unprofitable government enterprises during the privatization process. As such, private business and their managers have a positive reputation and are seen as the driving force which will put Poland into the ranks of prospering Western European nations. Moreover, the government under president Aleksander Kwasniewski is trying to encourage and further the business climate by passing bills which deal with the question of economic liberty. On July 2, 2004, congress passed a bill to rid the economy from many cumbersome bureaucratic procedures and unnecessary concessions, to limit the duration of audits which business are often subjected to and to speed up the process of business registrations.

Sources: www.WarsawBusinessJournal.com; German Department of Foreign Affairs (accessed through: www.auswaertiges-amt.de)

32 Government enterprises: Rating 4.1

In the 90?s Poland embarked on the burdensome journey of privatizing large monopolies and government-owned industries, left over from the communist era. To date there are still large government enterprises, such as the press distributor Ruch and the largest polish distillery, Polmos. However, the government is actively working on the privatization process and just recently (September 2004), Poland's largest retail bank, PKO BP, has obtained the go-ahead to go public from the Securities and Stock Exchange Commission. Furthermore, the large government-owned oil and margarine producer ZPT, will possibly be integrated into the private enterprise Olvit, a large dairy product company. The privatization of abovementioned press distributor is also in the works.

Sources: Der Spiegel Online (accessed through: www.spiegel.de)

33 International security agreements: Rating 5.0

After the collapse of communism in Eastern and Central Europe, Poland recognized the importance of entering new security agreements with its European neighbors to ensure lasting conditions of stability and security. Poland achieved its goal by joining the North Atlantic Treaty Organization (NATO) on 03/12/199. Poland became part of this European and American defense system of allied forces and now enjoys the guarantee of security and stability, as a democratic, independent and sovereign country. Additionally Poland became a close ally to the United States, providing one of the largest contingents of military personnel in the current war in Iraq.

Sources: Personal Experience; CIA World Fact book (accessed through: www.cia.gov)

34 Protection of domestic enterprises from government mandated costs: Rating 3.8

In comparison to most Western European countries Poland is able to offer domestic firms and investors the large advantage of relatively cheap labor costs, a progressive culture of entrepreneurship and a generally open business climate. With its economy growing at a rate of about 7% a year, Poland is also often referred to as an Eastern European ?tiger? state. However, the country could probably do much better in many areas if it wouldn?t be for remnants from communist times, like an unclear and slow administrative machinery, the ever present problem of nepotism and bribery, and the excessive burden of concessions and permits, required to get things done. These factors impose direct or indirect government mandated costs on the investor. According to the U.S. Department of State, ?The [polish] government acknowledges that its policies are not as transparent as they ought to be and that bureaucratic requirements continue to impose a burden on investors. Uneven and unpredictable regulatory treatment and a generally high level of administrative ?red tape? are recurring complaints of investors.? In addition, ?investors must comply with a variety of laws concerning taxation, labor practices, health and safety, and the environment. Complaints about these laws, especially the tax system, center on the lack of clarity and often-draconian penalties for minor errors.?

Sources: Financial Times (accessed through: www.ft.com); U.S. Department of State (accessed through: www.msz.gov.pl)


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