'STEP' Country Profile Print E-mail


Social – The People

Poland comprises a number of ethnic groups: Polish, German, Ukrainian, Belorussian, Lithuanian, although Poles make up 98% of the population. Most of its workforce is deployed in industry and construction (29%), with agriculture making up 16% and services 54%.

Poland's central social challenge, outside of Warsaw, is unemployment. But, paradoxically, high unemployment makes its labour force more attractive to overseas investors, because high unemployment is a dampener to wage growth. According to "Cushman & Wakefield Healey & Baker Cities Monitor", Warsaw is the best capital city in Europe in terms of cost of staff.

In 2004, the average monthly gross wages in Poland were lower than in the Czech Republic and Hungary. Large cities have  distinctively higher wages than its surroundings. Regions with high industry activity, experience higher wages than regions with the large share of agriculture sector (eastern and northern parts of Poland). At the end of 2005 the average wage in Poland amounted to EUR 592 (USD 736 and PLN 2,380).

At the end of February 2006 the number of unemployed registered reached 2,865,900, which amounted to 18% of the labour force (Source: Central Statistical Office -GUS). This could be attributed to a rise in labour productivity, coupled with a net increase in the working age population, as well as restructuring processes in key industries (steel, mining) and the railway infrastructure.  Nevertheless, unemployment is expected to decrease in the following years due to the growth of services and further changes in the job market. (Dublin Polish Embassy)

Poland has one of the youngest populations in Europe with a full 50% of the population under 35. The median age in the UK, by comparison is 38.4 years. We have to go back to 1971 to find a median age in the UK, like Poland's today.

Poland also has an exceptionally high number of students relative to its total population - around 2 million students are currently enrolled in full time education. And it is particularly strong in the science and IT sectors - key wealth producing academic disciplines.

Polish families are expecting better quality residential property and home ownership is rising steadily from 48% in 1988, to 55% in 2003

Technology

Since the political changes in 1989, the general telecommunications policy has focused on the liberalization of the telecommunications market and the extension and integration of existing regulations. The governmental change in 1997 led to further liberalisation of the telecommunications market, which resulted in the privatisation of Telekomunikacja Polska S.A. (TPSA) and the restructuring of the Polish Post.

The Ministry of Posts and Telecommunications issued licenses for telecommunications networks and services except for services provided by TPSA.

The mobile sector is competitive. On September 1, 2000 Minister Tomasz Szyszko presented a draft call for tender for the Universal Mobile Telecommunication System UMTS, the third generation mobile telecom services. When only tenders of three Polish cellular operators were submitted, Minister Szyszko decided to cancel the tender and extended existing licenses for mobile cellular telecommunication services.

From 2001, under the new Telecommunications Law, licenses are replaced by authorizations. The Office of Telecommunications Regulation (OTR) is established. The President of the OTR is the competent regulatory authority for telecommunications activities including authorizations, frequency management and monitoring of compliance with the requirements of electromagnetic compatibility.

Modernisation of the telecommunications network has accelerated with market-based competition finalised in 2003, fixed line service is dominated by the former state-owned company but is dwarfed by the growth in wireless telephony. There are 11,803m landlines in use (’05) and 29.166m mobiles

The government, however, continues to play a strong role in the economy, as seen in the presence of red tape and the high level of politicisation in many business decisions. Investors complain that state regulation is not transparent or predictable, and the economy suffers from a lack of competition in many sectors, notably telecommunications.

Economy

The Polish economy grew rapidly in the mid-1990s, but slowed considerably in 2001 and 2002, and returned again to healthy growth rates in 2003. Poland’s gross domestic product (GDP) grew at an annualized rate of 5.2% in the first quarter of 2006.

The size and economic clout of Poland gave the country the highest profile of the 2004 EU entrants and is now being successfully integrated into the EU.

Faster growth has begun to reduce persistently high unemployment, from nearly 20% in the middle of 2004 to 16.5% in May 2006. Tight monetary policy and dramatic productivity growth have helped to hold down inflation, which was 2.1% in 2005. Likewise, Poland's current account deficit, which grew rapidly in the late 1990s, has since moderated to 1.4% of GDP in 2005.

The 2005 budget deficit was 27.5 billion zloty, or 2.8% of GDP in 2005, and the current government pledged to restrain the 2006 and 2007 budgets at 30 billion zloty.

Throughout the 1990s, the United States and other Western countries supported the growth of a free enterprise economy by reducing Poland's foreign debt burden, providing economic aid, and lowering trade barriers. Poland graduated from U.S Agency for International Development (USAID) assistance in 2000 and paid the balance of its U.S.-held Paris Club debt in 2005.

The economic reforms introduced in 1990 removed price controls, eliminated most subsidies to industry, opened markets to international competition, and imposed strict budgetary and monetary discipline. Poland was the first former communist economy in central Europe, to end its recession and return to growth in the early 1990s. The private sector now accounts for over two-thirds of GDP.

Economic success coupled with successful monetary efforts to strengthen the zloty, have put Poland within reach of the National Bank’s goal of Euro accession in 2008-2009. As a result of Poland's growth and investment-friendly climate, the country has received over $85 billion in direct foreign investment since 1990, with roughly $7 billion in 2004 alone. According to a recently publish report by Ernst and Young, Poland is tied with Germany as the most attractive destination for foreign investment in Europe. The availability of cheap land and a large, relatively skilled labour force are among Polish strengths.

For many Western managers, low-cost country (LCC) sourcing is synonymous with sourcing from China. Its sheer size, large unexploited potential and massive growth put China in focus of everybody's attention. But when serving (Western) European markets, China is not the leading import country for all industries.

The most important factors in differentiating among LCCs with regard to cost competitiveness are blue-collar-labour and logistics cost. The less significant the blue-collar labour part is and the lower relative cargo value, the more favourable a Central European source country like Poland becomes, when serving Western European markets. For example, steel generally is more favourably sourced from Poland because of its relatively low cargo value.

Foreign Trade

 
With the collapse of the ruble-based COMECON trading bloc in 1990, Poland scrambled to reorient its trade. As early as 1996, 70% of its trade was with EU-15 members, and neighbouring Germany today is Poland's dominant trading partner. Most of Poland's imports are capital goods needed for industrial retooling and for manufacturing inputs, rather than imports for consumption. Therefore, a deficit is expected and should even be regarded as positive at this point.

Poland, a member of the World Trade Organization (WTO) and European Union, applies the EU’s common external tariff to goods from other countries--including the U.S.

In the year after it joined the EU, Poland experienced an overall growth in exports of 30%. This growth was not confined to trade among EU partners: while exports to EU countries rose by 27%, exports to developing countries rose by 46%, and exports to Russia rose an unexpected 77%. Poland’s trade balance continued to improve, with export growth significantly outpacing import growth.

Opportunities for trade and investment continue to exist across virtually all sectors. The American Chamber of Commerce in Poland, founded in 1991 with seven members, now has more than 300 members. Strong economic growth potential, a large domestic market, EU membership, and political stability are the top reasons U.S. and other foreign companies do business in Poland.

Politics

Poland has a stable political backdrop. The constitution now in effect was approved by a national referendum on May 25, 1997.

The current government structure consists of a council of ministers led by a Prime Minister, typically chosen from the majority coalition in the lower house (Sejm).

The president, elected every five years, for no more than two terms, is the head of state and commander-in-chief of the armed forces.

The parliament consists of the 460-member Sejm and the 100-member Senate, or upper house. The new constitution and the reformed administrative division (as of 1999) required a revision of the election ordinance (passed in April 2001). The most important changes were liquidation of a national list (all deputies are elected by voters in electoral districts) and introduction of a new method of calculating seats (the modified St. Lague method replaced the d'Hondt method, thus eliminating the premium for the top parties). The law stipulated that with the exception of guaranteed seats for small ethnic parties, only parties receiving at least 5% of the total vote could enter parliament.

Parties represented in the newly elected Sejm are Law and Justice (PiS), Civic Platform (PO), Self-Defense (SO), Democratic Left Alliance (SLD), the League of Polish Families (LPR), and the Polish Peasant Party (PSL).