CONFERENCE CALL: Poland’s transition is not over yet

By bne IntelliNews May 7, 2015

Henry Kirby in London -


Panelists on a bne IntelliNews debate were hesitant to label Poland’s post-Soviet transition a complete success, but agreed that impressive progress has been made, albeit with scope for improvement.

“After the fall of the Berlin Wall, developments that should have taken decades were crunched into just a few tumultuous years, and nowhere more so than in Poland,” said bne IntelliNews Editor-at-Large Liam Halligan, who chaired the event.

“Since Francis Fukuyama’s assertion that the fall of the Soviet Union marked the ‘End of History’, the Polish economy has doubled in size from 32% to 60% of the Western European average per capita income,” Halligan added.

The event, entitled “Poland: A Successful Transition?” – held at London’s Covent Garden Hotel on May 5 – brought together panelists from the professional and diplomatic sectors with the aim of dissecting the political and economic future of the EU’s eighth largest economy.

Solicitor and board member of the Polish City Club Katarzyna Boguslawska explained the difficulty Poles had adapting to a free market economy after nearly half a century of Soviet rule. “We lived in the relative safety net of a state-run government and state-run businesses. Lots of people did find the transition difficult,” she said.

Despite the impressive macro figures that Poland boasts, demographic problems such as a shrinking population and low birth rate, together with an unsustainable model of cheap credit mean that the journey for Poland is far from complete, as former UK Ambassador to Warsaw Charles Crawford noted.

“Many would say it [Poland’s post-Soviet transition] is not a success. Soviet war memorials in every town, a massive rise in debt, 12% unemployment despite three million emigrants, and a continuing brain drain,” said Crawford, questioning how successful the transition has been.

Demographics aside, Poland’s growth numbers “are impressive by any standards", Crawford made a point of adding.

“Poland’s economy in the grand scheme is not huge. It is roughly a third of the size of Spain’s, but that’s got nothing to do with Poland – it’s the cost of communism. If you have 2% growth over 50-to-60 years you’re going to be much richer than if you have 2-3% growth over 20 years – but Poland is catching up,” Crawford said.

Current Polish Ambassador to the UK HE Witold Sobkow conceded that the brain drain – where educated and entrepreneurial young Poles are emigrating in large numbers – is a problem, yet he pointed out that much of Poland’s talent is staying at home, or returning.

“We still have a lot of young and well-qualified people willing to work in Poland and many of those who leave come back and invest in Poland – not just in monetary terms, but also with skills and managerial ability. Many have come back, but not as many as we would like,” Sobkow said.

Panelists agreed that procedural reforms are key if Poland is to develop further, with both Crawford and Boguslawska citing complex bureaucratic red tape, which can hinder business.

“Even simple, fee-based agreements in Poland will require a three-page contract,” said Crawford, attributing the heavy red tape to “communist legacy instincts,” whereby “many Poles just don’t trust people”.

Boguslawska agreed that bureaucracy is a hindrance to progress, recounting that “it can seem impossible to set up a company whereas here [in the UK] we can do it online in five minutes.”

Ambassador Sobkow highlighted the huge potential for the already-strong manufacturing sector in Poland: “We sell a lot of products that are Polish but you have no idea that they are Polish. Fiat cars, furniture in Ikea or brands with nice names like Gino Rossi – an Italian name because it sells goods but it’s actually Polish. Our problem is that we do not have Polish brands, somehow.”

Sobkow also spoke of Poland’s successful push to diversify its trade, especially in light of Russian trade embargoes. “If you can’t sell apples to Ukraine or Russia, you can sell them in Hong Kong and in other places. In a way, it [the effect of embargoes] has been good for Poland and it’s forced us to look for alternative markets in America, Asia and elsewhere,” he explained.

Boguslawska, an associate solicitor at Saunders Law LLP, spoke of the room for improvement in the Polish legal system, saying that certain elements of Soviet rule are still present there. “In Poland, the system of knowing people and networking is still very much on,” she admitted. “Here [in the UK], when I prepare a case, I don’t know what judge will hear it. Even if my barrister knows the judge, there is no way that the judge will meet for drinks with them. This still happens in Poland.”

The issue of Poland’s desire to join the Euro was also addressed by the panel, with Ambassador Sobkow noting that Poland’s long-term goal of joining the Eurozone could hinder short-term development.

“At the moment, elites tend to focus on public deficits and public debt so that we fulfill the Maastricht criteria for joining the Euro, yet introducing deep structural reforms is also important,” he said. “[EU] structural and cohesion funds will end one day as they did in Spain and Greece. We are preparing for the future.”

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