Economy

Since the fall of communism, Poland has steadfastly pursued a policy of liberalising the economy and today stands out as one of the most successful and open examples of the transition from a partially state-directed economy to a primarily privately owned market economy.

The privatisation of small and medium state-owned companies and a liberal law on establishing new firms have allowed the development of an aggressive private sector. As a consequence, consumer rights organisations have also appeared. Between 2007 and 2010, the government plans to float twenty public companies on the stock market, including parts of the coal industry. To date (2007), the biggest privatisations have been the sale of the national telecoms firm Telekomunikacja Polska to France Telecom in 2000, and an issue of 30% of the shares in Poland's largest bank, PKO Bank Polski, on the Polish stockmarket in 2004.

Economic Reform Program

The economic reforms of the Balcerowicz plan introduced in 1990 removed price controls, eliminated most subsidies to industry, opened markets to international competition and imposed strict budgetary and monetary discipline. Poland was the first former centrally planned economy in central Europe to end its recession and return to growth in the early 1990s. Since 1992, the Polish economy has enjoyed an accelerated recovery, although growth has recently slowed. The private sector now accounts for over two-thirds of the GDP.

As a result of Poland's growth and investment-friendly climate, the country has received over $50 billion in direct foreign investment since 1990. However, the government continues to play a strong role in the economy, as seen in excessive red tape and the high level of politicization in many business decisions. Investors complain that state regulation is not transparent or predictable; the economy suffers from a lack of competition in many sectors, notably telecommunications. In early 2002, the government announced a new set of economic reforms, designed in many ways to complete the process launched in 1990. The package acknowledges the need to improve Poland's investment climate, particularly the conditions for small and medium-sized enterprises, and better prepare the economy to compete as a member of the European Union. The government also aims to improve Poland's public finances to prepare for adoption of the Euro (planned 2011).

Agriculture

Agriculture employs 16.1% of the work force but contributes only 4.8% to the gross domestic product (GDP), reflecting relatively low productivity. Unlike the industrial sector, Poland's agricultural sector remained largely in private hands during the decades of communist rule. Most of the former state farms are now leased to farmer tenants. Lack of credit is hampering efforts to sell former state farmland. Currently, Poland's 2 million private farms occupy 90% of all farmland and account for roughly the same percentage of total agricultural production. Farms are small-8 hectares on average-and often fragmented. Farms with an area exceeding 15 ha accounted for only 9% of the total number of farms but cover 45% of total agricultural area. Over half of all farm households in Poland produce only for their own needs with little, if any, commercial sales.

Poland is a net exporter of processed fruit and vegetables, meat, and dairy products. Processors often rely on imports to supplement domestic supplies of wheat, feed grains, vegetable oil, and protein meals, which are generally insufficient to meet domestic demand. However, Poland is the leading producer in Europe of potatoes and rye and is one of the world's largest producers of sugar beets. Poland also is a significant producer of rapeseed, grains, hogs, and cattle. Attempts to increase domestic feed grain production are hampered by the short growing season, poor soil, and the small size of farms.

Industry

Before World War II, Poland's industrial base was concentrated in the coal, textile, chemical, machinery, iron and steel sectors. Today it extends to fertilizers, petrochemicals, machine tools, electrical machinery, electronics, cars and shipbuilding. It employs 29% of the work force and contributes 31.2% to the gross domestic product (GDP).

Poland's industrial base suffered greatly during World War II, and many resources were directed toward reconstruction. The communist economic system imposed in the late 1940s created large and unwieldy economic structures operated under a tight central command. In part because of this systemic rigidity, the economy performed poorly even in comparison with other economies in central Europe.

In 1990, the Mazowiecki government began a comprehensive reform program to replace the centralised command economy with a market-oriented system. While the results overall have been impressive, many large state-owned industrial enterprises, particularly the railroad and the mining, steel, and defence sectors, have remained resistant to the change and downsizing required to survive in a market-based economy.

Foreign Trade

With the collapse of the ruble-based COMECON trading bloc in 1991, Poland scrambled to reorient its trade. As early as 1996, 70% of its trade was with EU members, and neighbouring Germany today is Poland's dominant trading partner, accounting for 27.2% of exports and 28.8% of imports. Poland joined the EU in May 2004. Before that, it fostered regional integration and trade through the Central European Free Trade Agreement (CEFTA), which included Hungary, the Czech Republic, Slovakia and Slovenia.

Most of Poland's imports are capital goods needed for industrial retooling and for manufacturing inputs, rather than imports for consumption. Therefore, a deficit is expected and should even be regarded as positive at this point. Poland is a member of the World Trade Organization and the European Union. It applies the EU's common external tariff to goods from other countries.

Foreign Business in Poland

Polish law is rather favourable to foreign entrepreneurs. The government offers investors various forms of state aid, such as: CIT tax at the level of 19% and investment incentives in 14 Special Economic Zones (among others: income tax exemption, real estate tax exemption, competitive land prices), several industrial and technology parks, the possibility to benefit from the EU structural funds, brownfield and greenfield localizations. According to the National Bank of Poland (NBP) the level of FDI inflow into Poland in 2006 amounted to 13.9 billion Euro.

One of the main reasons why investors tend to choose Poland is its location at the very heart of continental Europe, part of the trans European road network and easy access to 250 million consumers in 1000 kilometres ray. Poland is a significant market of 38 million consumers driving 10% annual retail market growth. In the first quarter of 2007, Polish economy recorded the GDP growth at 7%, which makes it twice that of the EU average.

According to the Ernst & Young report, Poland ranks 7th in the world in terms of investment attractiveness. According to the OECD report, in 2004 Poles were one of the hardest working nations in Europe. In the first half of 2007 the indicator of detected economic crimes was 95.3%.

It is estimated that the selection of Poland as the co-organizer of the European Football Championships in 2012 will speed up a lot of investments carried out in Poland in the coming years. It will mainly be the investment in sectors such as road, railway and air infrastructure, as well as in the hotel, tourism, gastronomy and recreation industry.