News Foreign policy Ministry Travel to Poland
THE GREEN ISLAND
When the economic indicators for the performance of European countries were coming in towards the end of 2009, Polish Prime Minister Donald Tusk held a press conference and proudly announced that, while other EU nations were in recession, Poland was the only state enjoying “positive growth.” Poland was the green island on a red map.
Interestingly, many economists in Europe and the United States started in 2009 to differentiate between the oxymoron “negative growth” and the pleonasm “positive growth”; the word “contraction” became widely used only a couple of months later. While quite a few economies started to “enjoy” their economic “negative growth,” Poles defended the green island for many months. In the most difficult year, 2009, Polish growth was reduced to 1.7 percent, compared to an EU average of -4.2 percent. In 2010, it continued to grow at a high speed of 3.9 percent compared with the EU average of 2.1 percent. (A few other states had faster growth, mainly due to a worse recession a year earlier,) The overall Polish economy has grown by some 25 percent since 2005, and income per capita increased from 51 percent of the EU average in 2005 to 61 percent in 2009 (the equivalent of EUR 14,300 or $20,000).
Employment figures were as positive as the overall growth trend in the critical year 2009. Unemployment in Poland had traditionally been high ever since the transition began in 1989. Throughout the 1990s, about 12 to 15 percent of the working-age population was without a job. In the early 2000s, every fifth Pole was without work. This situation has radically improved since EU accession in 2004. Before the crisis erupted in the second half of 2008, unemployment was at 7.1 percent. Since then, while unemployment in other states has risen radically (e.g. in Spain from 8.3 percent in 2007 to 20.4 percent in January 2011 and in Ireland from 4.6 percent in 2007 to 13.5 percent in January 2011), in Poland unemployment rose moderately to 9.7 percent in January 2011.
Why was the Polish economy so resilient to the crisis? This was the question asked across the continent in 2009 and 2010 with a mixture of admiration and disbelief. Poles themselves were surprised by the unexpected results. From the short-range perspective of 2011, a few factors played in favour of the Polish case. Firstly, the country’s size mattered. Its internal market is much larger than that of any other newer member country, hence its economy is less exposed to exports. When exports all around Europe sharply decreased in 2009, Poland’s stable internal consumption served as a cushion. Secondly, there were the exports themselves, which picked up immediately when Western European governments started their stimulus packages. Polish exports are also widely diversified, a fact which helped to limit the negative impact.
The situation was enhanced through the currency exchange – the national currency, the zloty, remained fully fluid; it was weakened considerably during the worst months of the crisis, further benefiting Polish exports and reducing labour costs. The third factor was a combination of low levels of bank lending and no real-estate bubble. Fourth was the influx of EU funding for many projects aimed at enhancing Poland’s economic competitiveness and creativity as well as improving its infrastructure. Since 2007, Poland has been Europe’s largest construction site; most European construction companies are present here and tried to win Polish public contracts in 2009 as many other projects around Europe were frozen at the time. This in turn lowered prices for roadwork. In short, a combination of factors has created a very positive situation for Poland.
The Polish green island successfully survived the difficult moments of 2009. Yet in order to catch up fully, Poles need to continue investing. Some studies have already predicted that, due to major investments in education, Poles have a strong chance to become level economically with Western European societies within a couple of decades. Polish students already achieve much better results than the European average. Even if the quality of university teaching has been average in recent years, two factors point to an upcoming major change. Firstly, the massive influx of new university graduates (raising the level of tertiary education among Poles from 7 percent to 15 percent within 10 years, with about 50 percent of young Poles attending university) came to an end as the baby boomers from the early 1980s graduated. Now the universities have to compete for students and are forced to improve the quality of teaching they offer. Secondly, government policy is changing, favouring not only teaching, but also spending more resources on research projects. As a consequence, one should expect a radical increase in the quality of Polish universities in the years to come.
Poland continues to invest in its people. It was the first country in Europe to create a state ministry responsible for public education – back in 1773. Today there are more than 400 higher education centres such as universities and polytechnics, both public and private. The total number of university students is about 2 million.
The new sources of economic growth are to be generated mainly from research and development and from services. Those segments of the economy are expanding while manufacturing rises more slowly. In fact, within a few years, Poland has become a major centre for business-process outsourcing. Other segments of the economy driving growth forward include the aerospace and automotive industries, house appliances, yacht building and industrial manufacturing. Polish organic agriculture is also fast-developing, as is health-services tourism.
Some say the sky is the limit. This is also what some companies in Poland seem to think. The largest oil refiner has established a strong position in the region, and many other companies in the field are looking for new business opportunities worldwide. Many Poles dream of becoming a new Qatar; apparently there are large deposits of shale gas all around the country. If this information is confirmed, Poland could transform from a gas importer into a gas-exporting nation within a decade. This would be a reversal of history: it was in Poland in the mid-19th century that the first oil refinery was created.
Poland has also become one of the most attractive markets for foreign direct investments. Throughout the 2000s, more than EUR 100 billion were invested. The privatisation process has been ongoing since 1989. Though the state still controls parts of important companies, large percentages of their shares have been privatised. In 2010 alone, the government sold shares in companies valued at a total of more than EUR 6 billion.
None of the Polish companies have yet made any major international breakthrough; the quest for the Polish Nokia-type company continues. Some firms have tried to “go global,” but with limited success so far. The next in line are few. Apart from the oil and gas producers, there is KGHM. Already a major company – it is the second-largest manufacturer of silver in the world and among the leading copper producers – in the second decade of the 2000s, its strategy is to expand and consolidate. The Warsaw Stock Exchange also has great ambitions to become the central stock exchange for all of Central Eastern Europe, challenging the other regional contenders in Prague, Budapest and Vienna. There are also many other companies with a very strong regional position in their segments, such as Solaris (buses), Reserved (retail), Nowy Styl (furniture) or Coffee Heaven (coffee shops chain).
If no Polish company is well-known globally as yet, the best-known Polish product is vodka. Its export is booming despite the crisis (or maybe thanks to it), and Polish vodka brands like Belvedere, Wyborowa or Żubrówka are among the most recognisable. The fame of Polish vodka entered Hollywood when actor Bruce Willis invested in a vodka company.
Still, the single most important reason why the green island of Poland continues to develop is the fact that Poles are hungry to grow. During more than 20 years of continuous change, the only constant element of the Polish landscape was “change” itself. Every eight years or so, society becomes too tired to run at the same speed and needs a break. Opinion polls conducted in recent months suggest that society is once again ready to take another leap forward.
Poland might have been the only country to grow in 2009. This unique situation will most likely not repeat itself in the coming years. Still, the Polish green island’s uniqueness lies in its society’s ability and willingness to embrace change. The Polish presidency of the Council of the EU can only hope that other European nations will follow suit in accepting ideas aimed at strengthening the European economy’s increased competitiveness.
Piotr Maciej Kaczyński