Poland tries to free up business

By bne IntelliNews March 20, 2012

Jan Cienski in Warsaw -

Poland's centre-right government has long talked the talk of slashing red tape and freeing up business, but has been afraid of the political costs of actually walking the walk - until now.

In its first four years in office, the government of Prime Minister Donald Tusk shied away from making painful economic reforms that would endanger is quest for a second term in office, but with victory in last year's parliamentary elections under its belt, the government is beginning to move.

The lead is being taken by Jaroslaw Gowin, the right-wing justice minister, heretofore known more for his Catholic orthodoxy than for any liberal views on the economy. Gowin recently announced that he will reduce regulations on 49 different professions, ranging from taxi drivers to sports trainers and real estate managers, part of a wider effort to dramatically reduce Poland's 380 regulated professions, the highest number in the European Union. The eventual goal is to free up more than 200 professions, ranging from public notaries to stock brokers, which the government estimates could create from 50,000 to 100,000 new jobs. "Poland has the largest number of privileged groups, the greatest restrictions on Polish economic freedom and entrepreneurship," says Gowin, calling the number of regulated professions Poland's "ranking of shame".

The attempts to slash away at the thickets of red tape have already provoked howls of protest. Gowin wants to do away with map memorisation tests for taxi drivers: "In the era of GPS that is absurd," he says, to which taxi drivers have responded with fury, fearing an influx of new entrants who could undercut their wages. Hanna Gronkiewicz-Waltz, Warsaw's mayor and a party colleague of Gowin's is also warning that this may not be a good idea.

However, premier Donald Tusk is firmly behind Gowin. "The deregulation of regulated professions will begin the process of widening and returning economic freedoms to Poles," Tusk said, calling the system of mandatory training and then exams set by professional associations for jobs like optometrists, lawyers, developers, real estate brokers and masseurs a "sickness" that prevents people from finding work.

Even the right-wing opposition Law and Justice party is clambering aboard the deregulation bandwagon. Jaroslaw Kaczynski, the party's leader, recently trotted out his own list of 200 professions he wanted to deregulate, boasting that it was "much further reaching" than the government's.

Try, try, try again

Gowin's programme marks a return to Tusk's verbal commitments to deregulation dating back to his first election victory in 2007, when he was happy to be portrayed as an economic liberal. But an early attempt at reducing red tape failed spectacularly.

Tusk chose Janusz Palikot, a successful businessman and MP, to head the effort in parliament, but Palikot, an inveterate self-promoter, used his deregulation commission to stage media stunts that made him personally very popular but which did little to free up the economy. Palikot achieved his aim - he is now in parliament at the head of his own eponymous party - but the effort to reduce wasteful regulations made little headway. "I'm doing what he [Palikot] was unable to do," says Gowin.

Every year, Lewiatan, the leading lobby group for Polish employers, puts together a list of "Black Barriers" that make life difficult for business, and every year the list gets longer. "Entrepreneurs have not changed their opinion that the labour code is over-regulated and that it creates serious barriers to economic activity and makes it difficult to increase employment," the association says.

Poland's international rankings reflect this lacklustre record. The World Bank's annual "Doing Business" rankings place Poland in 62nd place, down from 59th in 2011, in large measure because of barriers to starting a business and problems with tax regulations.

Those hurdles haven't prevented Poland from racking up some of the EU's best growth numbers. The economy grew by 4.3% last year and looks set to hit about 3% this year, one of the highest in the EU. As the Finance Ministry is keen to point out, from 2008-2011, the time of the global economic crisis, the Polish economy grew by 15.7%, while the EU as a whole contracted by 0.5% during that period. However, there are increasing signs that Poland's economic growth will start to slow in 2013, and the government is looking to find ways to defend against a slump and to lower unemployment, currently at 13.5%.

Gowin's early targets are relatively uncontroversial - aside from taxi drivers, other professions like security guards, sports instructors and tour guides have little political heft and are unlikely to cause him many problems. The problems will start when he starts to try to tackle wealthier and more powerful jobs like notaries and investment advisors. Poland's Financial Supervision Authority is already making worried noises about reducing requirements for brokers while the insurance industry professes to be worried about falling quality of public services.

Tusk seems to be well aware of the risk. "When it comes to deregulating professions everyone is for, but when a concrete proposal arrives, then some become cowards," he said.

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