More Integration, Less Regulation
August 29, 2013
Janusz Piechociński, deputy prime minister and economy minister, talks to Andrzej Jonas and Andrzej Ratajczyk.
How would you assess Poland’s situation compared to what is happening in Europe and the world?
In general, the current situation across the world can be described as a state of exceptional uncertainty. Take the recent events in Brazil, for example. In this country, which in recent years has become an emerging economic powerhouse, an increase in public transportation ticket prices—an apparently insignificant event—was enough to provoke violent riots. In turn, in Turkey, one of the world’s fastest growing economies and ranking high in terms of investment appeal, the cutting down of some trees in a prominent park was enough to unleash powerful social tensions with cultural, religious and political undertones. Yet another example is Egypt. It seemed that this country, after staging democratic elections, would gain greater political stability. Unfortunately, that did not happen, as evidenced by riots in which people are being killed. The future situation in these countries is hard to predict today. Such examples can be multiplied. All that goes to show just how uncertain are the times in which we are living.
How is Poland faring in this uncertain world?
Poland has a great reputation abroad, which is confirmed by various studies and ranking lists. Poland’s predictability as well as its political, social and economic stability are particularly important for foreign businesses. Stability is Poland’s greatest advantage, according to 86 percent of businesses that have already invested or are planning to invest in Poland. Interestingly, this view is shared by only 56 percent of respondents among Polish businesses. One of Poland’s biggest selling points is its human capital. Poles are increasingly well educated. The young generation wants to get an education, which is shown by the large number of students, at 2 million.
Recent years have confirmed the strength and attractiveness of Poland’s entrepreneurship. But now Poland is facing new challenges because the world is changing under the influence of globalization. We have to be more competitive in Europe and globally. Take the job market, for example, which, because of globalization, requires new regulations, such as flexible working hours. We need to redefine the labor code for BPO business service centers. If Poland wants to become the largest center of modern services for global companies, our legal regulations, when it comes to labor law, should meet investors’ needs. We live in different time zones with different public holidays. And having rigid rules when it comes to working hours makes customer service in different parts of the world difficult. This example shows that we have to change our old thinking patterns. We need to be aware that in an era of globalization the scale of the challenges as well as competition have increased.
Can Europe, which has already lost some of its competitive advantages, still effectively compete on the global market?
The establishment of a transatlantic free-trade area, which has been at the center of intensive talks between Europe and America for a year now, could be a response to globalization. But Europe cannot strive to compete in areas where it is doomed to lose—such as wages, energy costs or taxes. We have to gain a competitive advantage through what I call the reindustrialization of Europe and the creation of a new generation of industries, in addition to a clearer awareness that competition is now stiffer than it used to be. I’m talking about competition not only at the country level, but also at the level of multinational companies operating globally.
Is the EU’s economic policy keeping up with global trends?
Europe aspires to set a good example of a coordinated global climate protection policy, which is good. But this policy cannot be assessed on the basis of a single criterion. Therefore, in my opinion, it is necessary to add new targets to the EU’s current “3x20” energy and climate package, which calls for a 20-percent reduction in carbon-dioxide emissions across the EU by 2020, combined with a 20-percent reduction in energy consumption, and an increase in the contribution of energy from renewable sources to 20 percent. The first new target should be to have industry generate at least 20 percent of Europe’s GDP. Second, the price of energy for the economy and households has to be stabilized and then lowered by 20 percent. Stopping energy prices from growing is a key issue when it comes to increasing the competitiveness of the European economy.
Imposing ambitious plans that are not well coordinated globally is not helping Europe increase its competitiveness. For example, coal production is being reduced in Europe at a time when many countries, such as Turkey, Kazakhstan and Vietnam, are beginning to develop their mining sectors.
What is the biggest problem of the Polish economy today?
One big problem, not only economically, but also socially and demographically are jobs, or rather the lack of jobs. But is this only because we have an economic slowdown and companies are going bankrupt? No. This is also due to an increase in labor productivity, which is far ahead of GDP growth, combined with an improvement in logistics processes, etc. It should also be noted that the creation of new jobs, especially in industry, is very cost-intensive. For example, in a corrugated cardboard plant built in Ostrołęka [100 km northeast of Warsaw] for zl.1.2 billion only 250 jobs have been created. And only a small percentage of these jobs are associated with the technological process. Most of the new workers were hired in the warehouse, security and other services for the company. This shows that industry, which needs fewer workers itself due to mechanization and automation of technological processes, nonetheless generates new jobs for the service sector. And without developing modern industry, it is difficult to increase employment in the economy as a whole. This has been experienced by service-oriented economies, which have been much harder hit by the crisis than industrial economies.
In your opinion, are there any sectors of the economy in which Polish companies should be particularly active?
It seems that one such sector is the automotive industry, which is in crisis in Europe. We would like Poland to form the largest automotive industry cluster in Europe together with the Czech Republic and Slovakia. For now, Poland assembles the smallest number of cars among these three countries. But it has something that the Czech and Slovak economies do not—a giant, professional car part and component sector.
What new service sectors could develop rapidly in Poland?
Apart from the sectors which are already being successfully developed, such as Business Process Outsourcing (BPO) and Information and Communications Technology (ICT), Poland should prepare and offer a special range of educational services. This is not about finding something to do for Polish universities, especially private ones, at this time of demographic low, but about attracting students from all over the world, especially from emerging markets, to Poland. That is why I would want free visas to be introduced for all those who want to study in Poland. But I would also expect—in consultation with the Ministry of Science and Higher Education and universities—that foreign students should be provided with an opportunity for an internship in the administration and the business sector during their five-year course of study. In this way, in addition to establishing contacts at the university, they will be able to learn more about the situation in the Polish economy. And that will help Poland build new economic relations with other countries in the future.
What are the basic pillars of Poland’s economic policy?
The first pillar is economic freedom, another is entrepreneurship. Other important components of economic policy are support for innovation and modernization in the economy and the transformation of valuable, individual human capital into collective, social capital. Yet another fundamental principle should be “more Europe,” meaning more economic integration and less regulation.
The development of Polish industry will not be possible without developing Poland’s energy sector and new sources of energy. What’s the role of shale gas and nuclear power in Poland’s energy mix?
As for shale gas, it seems to me that we built up our hopes too high regarding the potential scale of deposits of this raw material in Poland. Some were ecstatic that, thanks to profitable extraction of shale gas, Poles could expect to have high pensions in the future. We have only drilled 44 wells so far. Another important issue in the near future will be adopting an investor-friendly law to regulate the extraction of deposits. We also have to work constantly on good relations between the mining companies and the local communities where the wells will be drilled.
When it comes to the Polish nuclear power program, we are at the stage of studying the environmental impact. We know that if we want to increase Poland’s energy security, we need to build a nuclear power plant in the north of the country. On the other hand, we cannot forget that the German government’s decision to withdraw from nuclear energy may strengthen the voice of those opposing the plan to build a nuclear power plant in Poland. It is also significant that the cost of nuclear programs has increased significantly after the Fukushima power plant failure in Japan.
Is the government determined to press ahead with both the shale gas and nuclear power programs?
Yes. We will also look for other opportunities to increase the security of energy supplies. Our priority is to increase energy production from domestic raw materials rather than imports.