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The Warsaw Voice » Real Estate » November 8, 2002
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Barriers to Growth
November 8, 2002 By Michal Jeziorski   
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For five years, entrepreneurs affiliated in the Investors' Conference have been working to remove administrative barriers hampering investment in the construction sector.

The fifth Investors' Obstacle Course, a national meeting of businesspeople and institutions linked with investment in the construction sector, took place Oct. 30. This annual conference regularly attracts investors, developers, architects, representatives of construction companies and central and local government administration officials from across the country.

Conference participants pointed out that even the simplest decisions concerned with investment projects in the Polish construction sector are a bureaucratic nightmare. Roman Nowicki, chairman of the Investors' Conference Presidium, said that “this situation stems from not only the slow work of bureaucrats, but first of all from the poorly devised law. Unclear regulations permit arbitrary interpretation by officials. This encourages corruption and effectively makes investors' lives difficult. However, the law can be changed."

The Investors' Conference notes that new bureaucratic obstacles are appearing all the time, posing a real threat to investment in construction in Poland. According to one regulation issued by the Ministry of Finance and concerned with the Value-Added Tax Act, an honest entrepreneur can be made accountable for the dishonest dealings of a company with which he loosely cooperates.
Paradoxically, if a subcontractor loses or fails to record, in their books, a copy of the invoice for a service performed—and thus fails to channel tax to the Treasury—the recipient of the invoice, or the investor, is not allowed to deduct the VAT and incurs additional costs because of this.

Another threat to the development of the construction sector is a bill, drafted by a group of deputies, on guaranteed construction payments. The bill seeks to solve the problem of payment bottlenecks in the construction sector by introducing the principle of collective responsibility of the investor and general contractor. If the general contractor fails to pay their subcontractors, the investor will be forced to take care of these payments. “As a result, the investor will pay twice for the same service: the first time he will pay the dishonest general contractor, and the second time—the subcontractor," Nowicki said. He admitted that payment bottlenecks were a serious problem in the construction sector. “But this problem cannot be regulated with a provision that not only hurts investors but is contrary to logic," he said, adding that such a method of dealing with payment bottlenecks in construction might lead to a situation in which investors would only sign contracts with large renowned companies or directly with subcontractors.
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