Poland: Economic Overview

Article excerpt

For several years Poland has paid the price of fiscal reform. Now led by former communist Alexander Kwasniewski, it is expanding its economy rapidly with large injections of foreign investment. Despite the perennial division of political parties and labor unions within the country, a consensus on the need for massive privatization and infrastructure modernization is expected to keep growth close to 6% in 1997.

Poland's accession to the OECD in mid1996 accelerated fiscal reforms that will spur foreign investment even more. The evolution of these reforms, guaranteeing equal treatment for foreign and domestic investors, easing restrictions on capital flows, and facilitating real estate purchases, make Poland one of the prime targets in Eastern Europe for Western capital.

FOREIGN INVESTMENT CLIMATE

A cornerstone of Poland's economic reforms is its Mass Privatization Program, initiated in November 1995, which will result in the divestment of some 500 state companies through 15 sectoral investment funds and the Warsaw stock exchange.With management boards comprised of both Polish and foreign members, these 15 national investment funds will oversee the sale of companies within their sector. The funds will share the equity of the privatized companies with workers; who will hold 15%; the national treasury,which will hold 25%; and other investment funds.

In mid-1996 the state sector accounted for 38% of the total labor force and about 40% of Poland's GDP, including 56% of industrial production. The main state-dominated sectors are mining, steel, power generation and distribution, telecommunication, shipbuilding, chemicals and pharmaceuticals, and arms.

In 1996 Poland approved its first privately financed build-operate-transfer project for the public utilities sector, involving a power plant and a municipal wastewater treatment facility. By the end of 1996 there were nearly a dozen privately financed infrastructure deals under negotiation or development, with a cumulative value of more than $4 billion, including three power plants, two toll roads, and a toll bridge.

BANKING SYSTEM

The National Bank of Poland is the country's central bank. A number of stateowned commercial banks have links to foreign banks both for resources and technical expertise. Currently, some 90 banks in Poland are privately owned or operate as commercial companies, and 18 foreign banks operate as joint stock companies. According to Polish reports, the assets of the 50 largest banks at the end of 1995 was $54.67 billion.

There are also more than 1,500 independent cooperative banks in the country, about half engaged in restructuring. …