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The Warsaw Voice » Business » November 3, 2015
Business & Economy
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Challenges Ahead for New Government
November 3, 2015   
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The new Polish government that will emerge in the wake of the Oct. 25 parliamentary election will face a number of challenges in the economy. Experts say it should adopt a clear set of economic policy goals and focus on priority areas including innovation.

Over the last several years, Poland has been among the fastest growing economies in Europe. According to the latest forecast by the European Commission, Poland’s gross domestic product (GDP) will grow 3.3 percent this year and 3.4 percent next year, marking one of the best results in the European Union. Factors contributing to this include growing exports, increasing industrial production and falling unemployment.

But Poland is still behind Western European economies in terms of the overall level of development. This is especially true of areas such as technological progress and innovation. Hi-tech products constitute only about 6.7 percent of Poland’s total exports, less than not only in old EU member states but also in some of Poland’s peers in Central and Eastern Europe. A no less important issue is high social expectations. “People in Poland want to live fast, like the rest of Europe. They are not interested in the prospect of a lengthy process of catching up. This raises the bar in terms of expectations and breeds frustration,” says a report—entitled “Challenges for the New Government”—by ThinkTank, a Warsaw-based center for dialogue and analysis.

The report presents the results of the “Re-Start: A Map of Challenges for Poland” project in which more than 150 experts and business practitioners invited by ThinkTank spent six months debating the most important challenges that the new government will have to deal with after the Oct. 25 parliament election. These debates made it possible to draw up a “map” of challenges that identifies 25 reference points for Poland’s economic growth in the years to come.

Poland is at a defining moment, said Małgorzata Bonikowska, managing partner at ThinkTank. “For the last two decades, it’s been running ‘on autopilot,’ sticking to EU guidelines. At first, this was related to the country joining the EU, then to successive financial plans and the absorption of [EU] funds, which became a priority in themselves. Now, Poland is progressing from its role as a mere recipient of EU guidelines to playing a role in creating them. This is why it has to turn off the autopilot and map out its own course of development and strategic thinking. It is necessary to define where our ship is headed and why. That will make it easier to find the right way.”

In the economic section of the Re-Start project, experts from various fields were tasked with identifying areas and problems that need government action to foster growth and give the Polish economy fresh impetus.

According to experts, one of the first tasks of the new government should be to develop an autonomous vision of economic growth for the next decade. Another important issue is the monitoring of barriers to entrepreneurship and efforts to increase business freedom in order to unlock the potential of companies active on the Polish market. The potential of Polish capital and companies can be increased through measures such as consolidation and concentration as well as improved conditions for Polish companies to expand abroad, in addition to efforts to strengthen Poland’s reputation abroad and raise the profile of Polish companies and products worldwide. Moreover, experts are calling for measures to increase the flexibility of employees and to protect them on the labor market, accompanied by regulations limiting excessive privileges for some professional groups. According to ThinkTank experts, of key importance is an active policy for developing innovativeness and encouraging ties between science and business.

The need to make the Polish economy more innovative has long been talked about. Innovation makes it possible for companies to expand. The government should play a role in this process by setting development guidelines and minimizing investment risk through participating in projects itself. But it is also important that businesses become involved in research and development.

During the recent European Forum for New Ideas conference in the northern Polish city of Sopot, Adam Czy˝ewski, chief economist at Polish fuel company PKN Orlen, said, “In our search for innovativeness, we should focus on solving concrete problems. “Otherwise we won’t be able to precisely predict what kind of solutions will be developed. Such an approach is also a lot of more welcome by investors.”

Innovations should be developed by working closely with experts in cutting-edge technology, scientists and researchers. According to U.S. economist Jeffrey Sachs, director of the Earth Institute at Columbia University—who once provided advice to Poland’s Leszek Balcerowicz when the latter reformed the Polish economy during its transition from communism to a free market in the early 1990s—universities can carry out projects with long-term goals and thus support companies, which tend to plan in the short term. And there is no innovation without long-term goals, Sachs said.

So far, Poland has been at the bottom of innovation rankings. This may change as the country gradually increases its spending on R&D. Since 2008, expenditure on R&D in Poland has more than doubled, and the government has promised a further increase in spending to 1.7 percent of GDP by 2020. According to the government’s Central Statistical Office, last year total expenditure on R&D in Poland increased yet again. Gross Domestic Expenditure on R&D (GERD) in Poland exceeded zl.16.1 billion in 2014 and was more than 12 percent higher than the previous year. This means that R&D spending claimed 0.94 percent of the country’s GDP last year, up from 0.87 percent in 2013. This figure is in line with a general trend globally. The greatest increase in R&D spending in 2014 was in the enterprise sector, 19.7 percent up on 2013 to more than zl.7.5 billion. This is a good sign for the future, but also a challenge for the new government to sustain this positive trend.
Andrzej Ratajczyk
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