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BUSINESS GUARDIAN www.guardian.co.tt MARCH 2014 • WEEK THREE
"Everything depends on what hap-
pens in the east," Janusz Piechocinski,
Poland's economy minister, said in a
recent interview on Polish radio.
He wasn't wrong. Around one-fifth
of Poland's exports go to neighbouring
Ukraine and Russia, thousands of jobs
depend on trade with the east and
Poland still gets much of its oil and
some of its natural gas from Russia.
No wonder, then, that, with an explo-
sive standoff between Russia and
Ukraine, Piechocinski is no longer
certain that Poland's GDP will increase
by as much as 3.2 per cent and its
exports by six per cent this year, as
he had forecast only a few weeks ago.
Piechocinski has more on his plate
than geopolitics, however. Poland's
GDP has grown on average by 4 per-
cent since 2004, when the country
joined the European Union. As the
EU's sixth-largest economy, Poland
at first thrived even during the finan-
cial crisis, but its economy has slowed
abruptly in the past couple of years.
It is a sign that the government of
Prime Minister Donald Tusk needs
to change course.
In its latest report on Poland,
launched on March 10 in Warsaw, the
Organisation for Economic Co-oper-
ation and Development, an intergov-
ernmental think tank, said that more
reforms are needed to get the econ-
omy growing fast again. The country
ought to raise productivity by liber-
alising the labour market, privatising
state-owned enterprises, cutting red
tape and making agriculture compet-
Despite progress, participation in
the labour market remains limited.
This problem will deepen as the work-
ing-age population shrinks. Poland's
birth rate is low and emigration, espe-
cially of the young and skilled, remains
high. The OECD recommends that
men and women should retire at the
same age and that Poland should raise
the pension age to 67 by 2030, rather
than by 2040, as planned. It could
boost female employment by improv-
ing child care and care for the elderly.
The jobseekers' allowance needs to
become more conditional. A law that
prevents firms from laying off an
employee in the last four years before
retirement should go, because it dis-
courages firms from hiring older peo-
Poland is in dire need of better
transportation infrastructure. That
should make the labour market more
flexible, as workers would find it easier
to commute. The rental market for
housing needs a boost, so that people
from areas with high unemployment
can more easily move to find work.
State ownership remains a vestige
of the communist regime, says Peter
Jarrett, one of the authors of the
OECD report. Several hundred largish
companies still are in the hands of
the state; the government has a ten-
dency to declare them "strategic"
when they are, in fact, only big.
Poland's largest bank, PKO Bank Pol-
ski, is state-owned, as is KGHM Pol-
ska Miedz, a mining firm, several
chemical producers, as well as Lot,
the national airline.
Public procurement works poorly,
partly because of Poland's history of
corruption. Civil servants have become
so fearful of being thought biased
that, in a public tender, they almost
always choose the lowest bidder.
"That works for an order of
100,000 pencils," Jarrett says, "but
not for motorways, where they should
opt for the best value for money."
Bureaucracy remains a scourge,
which explains why Poland ranks 45th,
behind countries such as Colombia
and Montenegro, in the World Bank's
ease-of-doing-business index. Agri-
culture is subsidised and hence too
big. KRUS, the farmers' national-
insurance system, is a burden on the
state and needs reform, but this will
disgruntle PSL, the coalition partner
of Civic Platform, Tusk's party.
As with other unpopular reforms,
it is unlikely to happen before
elections next year.
Tusk is taking a risk, however,
if he waits too long to bring about
change. The economy's funda-
mentals are still good, but
Poland's poor demography will
soon bite. Even today some
employers cannot find the work-
ers they are looking for. Before
the financial crisis struck, Ireland
managed to lure back talented
emigres. Poland should be aiming
to do the same.
@2014 The Economist Newspaper
Ltd. Distributed by the New York
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