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The Warsaw Voice » Politics » May 7, 2008
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How to Stay Competitive
May 7, 2008   
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Danuta Hübner, European commissioner for regional policy, talks to Andrzej Jonas and Witold ¯ygulski.

What is Poland's position in the European Union today? How do people in Brussels see the Polish economy?
We are still among the member countries with very high GDP growth rates. But we have reached a point where we are uncertain about future developments in the European economy in the coming years. I have the impression we are still hoping that the current global crisis will somehow bypass Europe and that developments in the United States will not have a very strong impact on the EU economy. But all projections indicate than an economic slowdown is inevitable so one can hardly be confident that the Polish economy will continue to expand as rapidly as it has so far.

The problem of the new member states is that they still contribute a mere 5 percent to the EU's GDP. And this cannot change any time soon, even if economic growth is very fast in these countries. Poland-being the largest of the new member states and perceived as a potentially large and very absorptive market-is very important and has attracted the interest of foreign investors.

One should remember, however, that the new member states are quickly losing their most important advantage-competitiveness based on low wages. Pay raises, combined with the growth of productivity and labor efficiency-which does not always keep pace with the growth of wages-mean that these economies are losing their competitive position, which was at the root of their appeal to foreign partners in recent years. By the way, this problem is faced not only by the new EU member states; China is also increasingly becoming a victim of its own influence on world prices. Labor costs are ceasing to be the most important factor behind economic growth so we should stop thinking in such terms. In Poland, we should increasingly stress what should be done to increase productivity and to ensure that productivity grows at the same rate as wages.

Second, it is necessary to look for new driving forces for the economy. The most important driver these days may be innovation, thinking in terms of a stronger relationship between science and business, and building more clusters, and technology, industrial and research parks. Everywhere in the developed world, such centers speed up the transfer of knowledge to the marketplace.

How, in your opinion, have EU funds contributed to bridging the gap between Poland and more affluent EU countries?
The process of catching up is definitely taking place because the growth rate in Poland and other new member states is far above the EU average. But for this process to produce a marked reduction in the disparity between Poland and the old EU countries, the Polish economy should be growing at a rate of 7-8 percent annually for at least a decade. Of course, as I have already said, Poland's economic growth must not be based on low wages, but on factors that can ensure competitiveness in the long run.

Are we able to effectively use EU funding? First, it should be stressed that we have to do with an unprecedented situation in the European Union's history, both in terms of the number of countries receiving structural funds and the size of this funding. It is a great challenge to all these countries, including Poland-a challenge to their public administration sectors above all.

It seems to me that we in Poland are not fully aware that an efficient and professional public administration at all levels-from the central to the local one-plays a vital role in managing EU funds. Spain was able to use structural funds better than any other EU country so far because it had an efficient public administration for centuries and understood that it was necessary to invest in administration and have well-paid civil servants at the central, regional and local levels.

Unfortunately, the myth of a useless bureaucrat who earns too much still lingers in Poland. The unfavorable situation in public administration will not change without an influx of young people who will no longer treat their public posts as a stopover on the way to the private sector, but as a career choice. My observations show that this bad stereotype is changing the fastest in the offices of province chairmen. It think the factor that best encourages these offices to work better is the prospect of the next elections during which voters will assess what the local government has done to change real living standards in the region.

In what sectors will Poland find it most difficult to absorb EU funds?
The greatest problem will be with environmental protection. We still do not realize that we have been adapting to EU environmental standards too slowly. At the moment, Poland is still unable to start some 900 million euros worth of transport projects because the required environmental impact evaluations have not been submitted to Brussels. I am still hoping for a quantum leap and a sharp acceleration in this area. The objective is to adopt a different business approach, build a new quality of life in solidarity with future generations. I would like civil servants and decision-makers responsible for growth to finally realize that environmental protection may be a source of hefty profits and new technology, and that all sides will benefit if we are guided by a common interest here.

In what areas is Poland in a position to engage in constructive dialogue within the EU, and where is this dialogue still difficult?
It is easier to talk about foreign policy, for example Eastern or Mediterranean policy, but it is more difficult to talk about issues where there are many controversies and the positions of the old and new members states differ considerably. One such issue is agricultural policy.

Is Poland sufficiently represented in EU institutions?
I think the level of Poland's representation still fails to measure up to the country's potential. And this is true of all the institutional and administrative levels. I can see, for example, that the number of Poles seeking EU jobs is smaller compared with other new member states, not to mention the old EU 15 countries. I think Polish authorities should be more active in this area. German institutions, for example, organize special courses for their candidates who have passed the first stages of recruitment for EU jobs so as to prepare them as well as possible for further rounds of selection.
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