Economic transformation and evolution of industrial policy - examples of a highly and less successful policies and main challenges in the context of Lisbon strategy. The case of Poland. Michał Górzyński CASE
Economic transformation 1. Starting position deep economic crisis in Poland in the late 8-ies 2. Shock therapy approach 1989/199 price liberalization (only 5% of prices reminded under the State regulations) Polish currency depreciation foreign exchange liberalization foreign trade liberalization limitation of subsidies (hard budget constrains) salaries control restrictive monetary policy (increase of the interest rates).
Implication for the industry New price structure (including the new price of the capital and energy) Foreign competition Decrease of the domestic demand (as a result of restrictive income policy) In 1991 a deep crisis of the enterprise sector started in Poland. The need to change the structure of the industry the goal to make it more competitive: Privatization FDI Development of the Polish private sector
The main adaptative activities of the Polish companies at the beginning of the 9-ties export reorientation (depreciated currency) production capacity and employment reduction restructuring of organization s structure (e.g. creation of marketing departments, strengthening of accounting departments, outsourcing of some activities security) development of distribution channels That was not enough. - according to W. Carlin that was only a defensive restructuring, while the strategic restructuring was needed know-how and capital inflow as well as the implementation of effective corporate government
Privatization Starting date: 199 Main goals: systemic (ownership change of the economy) and economic (increase of the effectiveness of the privatized companies) Speed priority: not so important Sectors excluded from privatization (part of the infrastructure and mining industry) The role of insiders: important Main methods of privatization: direct sales, MEBO, mass privatization Finish date:? there are still more than 2 companies partially or fully owned by the State
25 Source: OECD 25 2 15 1 5 GDP per capita 1994 1995 1996 1997 1998 1999 2 21 22 23 24 year Czech Republic Hungary Poland Slovak Republic 1992 1993 199 1991 US Dollar, current prices and PPPs 25 GDP deflator 6 5 4 3 2 1 Real GDP growth 1 5 1991 1993 1995 1997 1999 21 23-5 -1-15 Year Czech Republik Hungary Poland Slovak Republik 25 24 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 Year Czech Republik Hungary Poland Slovak Republic 2 1-1 -2-3 -4 Real value added in industry 19 96 19 98 2 2 2 2 4 Year Czech Republic Hungary Poland Slovak Republic 19 94 19 92 Annual growth in percentage Annual growth in percentage A n n u a l g r o w th i n p e r c e n ta g e
23 24 25 2 15 1 5 unemployment rates 1997 1998 1999 2 21 22 Year Czech Republic Hungary Poland Slovak Republic OECD total 1993 1994 1995 1996 1992 As a percentage of civilian labour force 6 4 2-2 -4-6 -8-1 Current account balance of payment 1995 1996 1997 1998 1999 2 21 22 23 24 Inflows of foreign direct investment Year Czech Republic Hungary Poland Slovak Republic 1995 1996 1997 1998 1999 2 21 22 23 24 25 1991 1992 1993 1994 As a percentage of GDP 1994 1993 16 14 12 1 8 6 4 2 Year Czech Republic Hungary Poland Slovak Republic Million US dollar
Examples of highly and less successful policies perspective 199-28 FDI attraction partially successful Special economic zones partially successful (only four zones are considered as successful cases) R&D policy failure (no restructuring of the State R&D sector) Stimulation of new private sector development - success Internationalization of Polish companies activities not satisfactory results Development of the secure and stable financial market in Poland success Restructuring of the mining sector not satisfactory results Stimulation of the cooperation among the firms (networking or clustering activities) not satisfactory results The policies that were successful 1-15 years ago are not necessary successful now different stage of industry and economy s development progressing economic integration and globalization
Achievements macroeconomic stabilization progressing economic integration with the EU rapid development of the private sector sound banking system flexible and competitive sector of Polish private enterprises well functioning capital market e.g. Warsaw Stock Exchange
Failures high unemployment rate low innovativeness of the Polish economy not enough level of internationalization of Polish enterprise sector weak SME sector small number of strong SMEs slow pace of liberalization of the infrastructure s sectors undeveloped infrastructure
Key challenge in the light of the Lisbon Strategy No more hidden and simple reserves to increase the competitiveness of the Polish companies Progressing global economic integration Globalization Increase of the cost of inputs Key challenge: to increase the innovativeness of the Polish industry
R&D expenditure 26 8 7 6 5 Ford 6782 mln Euro Daimler-Ch 5234 mln Euro 4 3 2 1 Poland 1385 mln Euro 1 2 3 4 Anwil 43 mln Euro
R&D expenditures 1996-26 GERD 1995-26 4 3,5 3 2,5 2 1,5 1,5 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 Czech Rep Poland Slovenia Finland BERD 1995-26 3 2,5 2 1,5 1,5 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 Czech Rep Poland Slovenia Finland
Innovativeness of EU countries Source: European Commission (26), European Innovation Progressing Report 26 Trendchart, DG Enterprise, Luxemburg.
R&D intensity of the most R&D investing companies from Poland, EU and US by sector in 25 14,% 12,% 12,4% 11,% 1,% 8,% 6,% 4,% 2,%,% High R&D intensity 2,5% 4,3% 3,% 1,9% Medium R&D intensity 1,6% 1,4%,4%,2%,2%,3% Low R&D intensity Very low R&D intensity EU US PL Source: EU and USA according to the Industrial R&D Investment Scoreboard IPTS, for Poland own estimations basing on ranking of the most innovative Polish companies of CASE and Rzeczpospolita
Sector's composition of most R&D investing companies from Poland, EU and USA PL 22% 51% 4% 23% US 67% 3% 1% 2% EU 36% 51% 7% 6% % 2% 4% 6% 8% 1% High R&D intensity Low R&D intensity Medium R&D intensity Very low R&D intensity Source: For EU and US EC (26 a), for Poland - own calculations based on CASE and Rzeczpospolita survey
Does Poland have a chance to catch up EU average level? Yes, but not so fast weak economic potential of Polish companies no firms operating on the global level (creation and implementation of international standards) lack of absorption capacities (identification of new technologies)
Thank you for your attention ul. Sienkiewicza 12-1 Warszawa tel/fax (48-22) 892 8 68/69 e-mail: michal.gorzynski@case.com.pl