Popular Political Party In Poland example essay topic

Poland has become the leader in Central Europe in attracting foreign investors, attracting about USD 50 billion of foreign direct investment (FDI) since 1990, according to the Polish Agency for Foreign Investment (PAIZ). PAIZ estimates that FDI inflows for 2001 will reach USD 6-8 billion, depending on the pace of privatization. Large capital surpluses due to FDI and portfolio inflows have caused net official reserves to increase, from 21.2 billion at the end of 1997 to USD 26 billion at the end of 2000. Long-term capital inflows are important to cover the current account deficit. According to statistics from PAIZ, as of the end of 2000, France was the largest investor in Poland, with a total of USD 7.9 billion. In second place was the U.S. with USD 7.35 billion and in third place was Germany with USD 5.9 billion.

France Telecom alone invested USD 3.2 billion in Poland in 2000, which significantly increased France's total FDI in Poland. U.S. exports to Poland in 2000 increased to USD 2.15 billion, up from USD 1.64 billion in 1999. Most sectors of the Polish economy recorded growth in 2000. The best performers were oil products and derivatives, the automobile industry, and the wood and wood products sector. Growth declined in the agriculture, textiles, tobacco, and coal sectors. For the first time since the early 1990's the construction sector contracted, although by only 1 percent. A slowdown in growth during the first half of 2001 has had an impact on most sectors, although those with higher reliance on exports are in a better situation.

Consumer goods and automobile sales have been hard hit by weak domestic demand. Most analysts expect growth will rebound from the second half of 2001. Poland's last parliamentary elections were in September 1997 when two parties with roots in the Solidarity movement, Solidarity Electoral Action (AWS) and the Freedom Union (UW), won 261 of the 460 seats in the Sejm and formed a coalition government. The majority government was dissolved in June 2000 when UW withdrew and five of its ministers resigned; AWS is now a minority government. The platform of the AWS supports privatization and welcomes foreign investment. Looking ahead to the scheduled 2001 election, as of July 31, all opinion polls predict a wide margin of victory for the Democratic Left Alliance (SLD).

All of Poland's major political parties favor foreign investment although they have, at one time or another exhibited some reservations about allowing foreigners to acquire dominant positions in strategic firms and industries being privatized. Poland's president, who serves as head of state and can veto legislation passed by parliament, is Aleksander Kwasniewski. He was re-elected in 2000 to a second (and final) five-year term. Provincial and local government can play an important role in facilitating or hindering trade and investment in Poland.

There are 16 provinces in Poland. In addition, there are local government bodies at the country and province level. Opportunities for trade and investment continue to exist across virtually all sectors in Poland. The American Chamber of Commerce in Poland, founded in 1991 with seven members, now has more than 300 members. Constant economic growth, the size of the Polish market, and a high level of political stability are the top reasons U.S. and other foreign companies do business in Poland. Most believe that Poland is the best market in Central and Eastern Europe for their products and investments. U.S. companies doing business in Poland face strong foreign competition.

Poland's domestic industry continues to develop, and sectors that have already privatized are becoming more productive and competitive. American firms interested in entering the Polish market should contact the U.S. Commercial Service office in Warsaw at web or. The CCG is prepared by the U.S. Embassy Warsaw. It is intended to provide general information on economic and political trends and guidelines for doing business in Poland. Trade regulations and legislation in Poland are subject to frequent change. Before making any decisions based on this information, specific agencies and organizations listed in the guide should be contacted.

Country Commercial Guides can be ordered in hard copy or diskette from the National Technical Information Service (NTIS) at (800) 553-NTIS.U.S. exporters seeking general export information / assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce's Trade Information Center at (800) USA-TRADE, or go to one of the following websites: web or web Chapter 2: Economic Trends and Outlook A. Major Trends and Outlook Poland has been making steady progress in raising its living standards closer to those in the European Union (EU). Per capita income in Poland (on a purchasing power parity basis) has risen from 31 percent of the average level in the EU in 1993 to 40 percent in 2000. Nonetheless, it will take decades more for Poland to reach the EU average. A dynamic private sector and generally sound fiscal and monetary policies have produced one of the fastest growing economies in Europe since 1994, although growth has slowed in recent years. The large, inefficient agricultural sector (which employs as much as a quarter of the workforce) and numerous loss-making state-owned enterprises have lagged behind the rapidly developing private sector. Polish society as a whole remains committed to improving Poland's macroeconomic fundamentals and further reducing the role that the state plays in the economy.

All of Poland's post-1989 governments (from across the political spectrum) have pursued economic reforms and generally sound fiscal and debt policies. Poland continues to liberalize its trade, foreign exchange, and investment policies in accordance with its obligations to the EU, the World Trade Organization (WTO), and the Organization for Economic Cooperation and Development (OECD). Poland is an applicant for full EU membership, with a target date of 2003. The process of harmonizing Polish laws and regulations to those of the EU is driving much of Poland's current economic agenda.

Even if, and is likely, the 2003 target slips by a few years, the legislative and economic reforms will continue to pay off in improved Polish competitiveness and higher living standards, and continue to generate new trade and investment opportunities. Poland's pace of economic growth has declined since 1998. The main factors include slower economic growth in western Europe and Russia, high domestic interest rates, and a strong Polish zloty. From 1994 to 1997, the economy had expanded by over five percent per year in real terms. In 1998, the growth rate slipped to 4.8 percent, in 1999 to 4.1 percent and in 2000 to 4.0 percent; forecasts for 2001 are in the range of 2-3 percent.

In dollar terms, Poland's GDP in 2000 equaled USD 158 billion, or USD 4,082 per capita. On a purchasing power parity basis, per capita income in Poland increased from USD 8,600 in 1999 to USD 8,700 in 2000. The private sector accounts for an estimated 70 percent of GDP (including a large gray market), and almost 70 percent of the labor force. After declining for several years through 1998, the unemployment rate rose to 13 percent in 1999 and 15 percent in 2000. With the exception of a slight increase in 1999, inflation has been dropping since 1990. Annual inflation (on a December-to-December basis) was 8.5 percent in 2000 and is expected to drop to 6 percent or lower by the end of 2001.

As noted further below, Poland's most pressing macroeconomic problems are a high fiscal deficit and increasing unemployment. B. Principal Growth Sectors Most sectors of the Polish economy recorded growth in 2000. For the first time since the early 1990's the construction sector contracted in 2000, although by only 1 percent. The slowdown in growth during the first half of 2001 has had an impact on most sectors, although those with higher reliance on exports are in a better situation. Most analysts expect growth will rebound from the second half of 2001. C. Government Role in the Economy Although over the past decade Poland has transformed itself into a private-sector-led market economy, the government continues to play a large role.

Government authorities at all levels still impose a bureaucratic burden on private business, although, as described more fully in Chapter 7, the government is taking steps to improve the situation. Approximately one-quarter of the GDP is still produced by the public sector. Poland has privatized nearly all small enterprises, most medium-size enterprises, and is now concentrating on the large enterprises. The government has set itself the goal of privatizing 70 percent of the remaining firms by the end of its four-year term in 2001; several large firms, including energy producers and remaining portions of firms in the refining, telecom, and insurance sectors are on the agenda for 2001. After these privatizations, the share of GDP generated by the private sector should increase to 85 percent. More problematic are the loss-making industries still in state hands, including the railroad, coal mines, steel mills and defense plants.

Although restructuring in these sectors has already begun, with elections looming in 2001 the government has not been very aggressive in selling or otherwise transforming these firms. Taxes in Poland are relatively high: VAT rates are zero, three, seven, and 22 percent; the corporate income tax is 26 percent; personal income tax brackets are 19, 30, and 40 percent. The corporate rate will be reduced over the coming years, reaching 22 percent in 2004, in a move to improve competitiveness; the fate of reform of personal tax rates after a presidential veto in 1999 is not certain. Social program contributions for pensions, disability and unemployment benefits, and health care amount to 48 percent of net wages in aggregate; the employer and the employee each pays a portion of these contributions. The government finances its budget deficit principally from domestic borrowing and privatization revenues.

The constitution prohibits the government from borrowing from the NBP. The progress of Polish economic transformation has occurred in large part due to the generally sound monetary and fiscal policies maintained by a succession of governments since 1989. The budget deficit remains a problem, however, and is the main reason monetary authorities have maintained high interest rates. The fiscal deficit has been around three percent of GDP in recent years, although a projected shortfall in tax receipts in 2001 has forced the government to cut spending and raise this year's deficit to four percent of GDP. The government's goal has been to balance the budget by 2003, although this target now appears optimistic. D. Balance of Payments Situation Poland's current account deficit jumped in 1999, reaching 7.5 percent of GDP. Significantly slower import growth has brought the deficit down to more manageable levels, reaching 6.3 percent in 2000 and around five percent as of mid 2001.

Despite the strong Polish zloty exports grew in 2000 by 25 percent, versus import growth of less than two percent. The trade deficit fell to USD 13.1 billion from USD 14.4 billion in 1999. With the zloty continuing to remain strong, the deficit is likely to grow in 2001. Poland has attracted about USD 50 billion of FDI since 1990, according to the Polish Agency for Foreign Investment (PAIZ). Large capital surpluses due to FDI and portfolio inflows have caused net official reserves to increase, from USD 21.2 billion at the end of 1997 to USD 26.0 billion at the end of 2000. Poland greatly benefits from the 1991 Paris Club and the 1994 London Club debt-rescheduling agreements, which roughly cut in half Poland's foreign debt.

In 1995, Poland paid back all IMF drawings. E. Infrastructure Situation: Distribution Communications, banking, insurance, accounting, and distribution systems are still developing in Poland. Communications services are adequate; modernization should accelerate with further privatization of TPSA (the main provider) and increasing competition in the sector. Internet usage is low compared to U.S. and western European levels, but increasing rapidly. The high cost of telecommunications services, coupled with the continued dominant position of TPSA, have slowed the introduction of new services, including e-commerce.

Cellular phone usage is high and service reliable. Companies establishing branch offices find office space and housing relatively expensive. Foreign companies can acquire small parcels of land without obtaining government permission, but the government has moved slowly in granting permits to acquire large parcels and some companies have complained there still are unnecessary delays in acquiring small parcels. There is a shortage of personnel with training and experience in some fields, particularly in finance, marketing, and human resources. The banking system is relatively well developed and well regulated. Foreigners control over 80 percent of the banking sector's equity.

Banks set their own lending and deposit rates. Interest rates are high (around 17 percent). The road system is inadequate. The number of cars is more than double the number in 1990.

There is especially a lack of adequate highways between major cities capable of carrying the increased volume of trucks necessary to the growth of Poland's distribution systems. An extensive road network upgrade is planned over the next 10-15 years, but much of this is not even in the design phase. Rural road travel is particularly difficult and very dangerous at night. Poland's air and seaports are structurally adequate for receiving and shipping cargo. However, all are in need of expansion and modernization to facilitate the growth of Poland's economy.

Airport cargo modernization is underway. A restructuring of the rail system is under examination. The existing rail network in Poland is relatively extensive. F. Regional Economic Integration Poland is well advanced in its negotiations to become a full member of the EU. Although 2003 remains the government's official date for accession, the EU has not formally announced a target.

While many chapters in the negotiations have been concluded, the most contentious -- including agriculture and the environment -- remain open. Under the terms of its 1992 Association Agreement with the EU, both sides have eliminated customs duties on most industrial products. Poland has free trade agreements with a number of other European countries, as detailed in Chapter 6. Chapter 3: Political Environment A. Nature of Political Relationship with the United States Every post-1989 Polish government has been a strong supporter of a continued American military and economic presence in Europe, and has identified membership in NATO, the European Union, and other Western security and economic structures as Poland's principal foreign policy priorities.

Poland has been a member of NATO and thus a U.S. ally since March 1999. Poland has done a superb job as the formal protector of American interests in Iraq since the Gulf War and cooperates closely with the United States on such issues as nuclear non-proliferation, human rights, regional cooperation in Central and Eastern Europe, and reform of the United Nations. Poland served successfully as the Chairman in Office of the Organization for Security and Cooperation in Europe (OSCE) in 1998 and chaired the Community of Democracies Initiative (CDI) and hosted CDI's first conference in Warsaw in 2000. From 1989 until the closure of the U.S. Agency for International Development's Polish program in 2000, Poland was the largest recipient of U.S. assistance to Central and Eastern Europe.

Since 1989, the U.S. has committed more than USD 4 billion to such areas as debt reduction, privatization, financial stabilization, financial institution building, entrepreneurial training, support for a free press and other democratic institutions, and efforts to improve Poland's environment. Until its closeout in 2001, the Peace Corps program in Poland was one of the world's largest. Poland's close cooperation with the United States is reflected in the large number of high-level visits exchanged between the two countries in recent years. President George W. Bush visited Poland as part of his first trip to Europe in June 2001 and delivered the keynote foreign policy speech of the trip in Warsaw. In 1998, Prime Minister Jerzy Buzek visited Washington and joined President Kwasniewski at the Washington NATO Summit in April 1999. Foreign Minister Wladyslaw Bartoszewski visited the U.S. in 2000 and 2001.

In May 2001, Deputy Prime Minister and Economy Minister Janusz Stein hoff visited the U.S. Other senior U.S. visitors to Poland since 1997 included former President Bush, former President Clinton, Secretaries of State Powell and Albright, Secretary of Defense Cohen, and many Senators and Representatives. Economic issues are playing an increasingly larger role in the bilateral relationship. A significant issue is the widening differential between tariffs on products originating in the EU and those of U.S. and other non-EU origin. This differential results from the gradual reduction of Poland's tariffs on EU products under its Association Agreement with the EU and the unchanging level of MFN tariffs. Most affected thus far are automobiles and electrical generating equipment, which face tariff differentials that U.S. companies fear will price them out of the market. The Polish government, during the visit of President Bush in June 2001, agreed to grant tariff reductions to a number of affected U.S. industries.

In addition, an open-skies agreement liberalizing airline services between Poland and the U.S. was signed during that visit. Another issue of considerable significance is the imposition by Poland of a 50 percent European content quota for television broadcasts, which Polish television regulators assert is necessary to meet requirements for EU accession. Protection of intellectual property remains a problem in Poland where piracy rates remain high and enforcement is inadequate. In addition, Poland has in some cases applied phytosanitary standards to agricultural products in ways that effectively result in the creation of non-tariff trade barriers. Poland also seems to apply product certification procedures with much the same result. B. Major Political Issues Affecting the Business Climate Leaders of Poland's major political parties have repeatedly expressed strong public support for foreign and specifically U.S. investment. Substantial foreign direct investment is considered essential to Poland's achieving its overarching goal of raising the standard of living to the levels of Western Europe.

Factions in the current governing Solidarity Electoral Action (AWS) and several smaller opposition parties, most notably the Polish Peasant Party (PSL) and the Movement for the Reconstruction of Poland (ROP), oppose liberalization of the sale of land to foreigners, especially Germans. Although all of Poland's major political parties at one time or another have exhibited some reservations about allowing foreigners to acquire dominant positions in strategic firms, the current government allows foreign investors to compete for controlling interests in all or most of those strategic firms undergoing privatization. As for trade issues, political parties's support for reducing tariff and non-tariff trade barriers varies from the avowedly open-market stance of the Freedom Union (UW) to the generally protectionist position of PSL and the parties of the far right. However, overall, Poland has been lowering trade barriers in accordance with its international obligations to the World Trade Organization.

While all major political parties are in favor of Poland joining the EU (which means Poland will have to adjust its laws and regulations to comport with the EU's acquis communautaire), they differ in their level of enthusiasm. Trade unions are also an element for foreign business to consider. The Polish trade union movement, the engine of the social movement that precipitated communism's collapse in the 1980's, has occasionally been problematic for foreign investors, particularly when managers of newly privatized state enterprises have instituted management changes. Resistance has also come from often-bloated middle management in such enterprises. But considering the huge growth and magnitude of U.S. investment, few American investors have encountered significant difficulties with Polish unions. C. Relations between the Federal Executive and Provincial Leaders Poland's January 1, 1999 administrative reform divided the country into 16 provinces (voivodeships) headed by governors (voivodes) appointed by the Prime Minister. Provinces are subdivided into counties (poviats) at the intermediate level, and into municipalities (g minas) at the local level.

Every four years the Poles elect local assemblies (Sejmik) at the provincial and county level. Each Sejmik is headed by a Marshall. Poland's last local elections were in September 1998 and new local elections will take place in 2002 unless called earlier. Local government manages public finances, health care, schools, social welfare assistance, and police. It also functions as the owner of local public assets. Local government is financed both from the state budget and from local taxes and fees, which according to the constitution it has the right to determine. D. Brief Synopsis of the Political System, Schedule for Elections and Orientation of Major Political Parties Poland is a parliamentary democracy.

The Constitution adopted in 1997 enhances several key elements of democracy including judicial review and the legislative process, while continuing to guarantee the wide range of civil rights, such as the right to free speech, press, and assembly that Poles have enjoyed since 1989. Poland has a bicameral Parliament, comprised of a Lower House (Sejm) and Upper House (Senate). Within the legislative branch of the government, the Sejm has preeminent power. The Senate's authority is limited to amending or delaying legislation passed by the Sejm. Both bodies are elected simultaneously. Elections to the Sejm are proportionate from multi-member districts ranging in size from seven to nineteen deputies.

Elections to the Senate are by plurality, from two- to -four-member districts. In Poland's September, 1997 parliamentary elections, two parties with roots in the Solidarity movement, Solidarity Electoral Action (AWS) and the Freedom Union (UW), won 261 of the 460 seats in the Sejm and formed a coalition government. However, looking ahead to the scheduled September 2001 election, in mid-2001 all opinion polls predicted a wide margin of victory for the Democratic Left Alliance (SLD). The Parliament is elected to a four-year term, and elections may be called earlier if the government loses a vote of no confidence. The Polish Prime Minister, who forms a government with a vote of confidence by the Sejm, chairs the Council of Ministers. Jerzy Buzek of the AWS was chosen as Prime Minister in 1997.

There are 19 cabinet ministers, two of whom serve as Deputy Prime Ministers. Leszek Miller leads the opposition SLD. Poland's President, who serves as the country's head of state, is Aleksander Kwasniewski, a former member of the pre-1989 communist party and founder of the post-1989 social democratic SLD. Kwasniewski defeated former Solidarity union leader Lech Walesa in Poland's second post war free Presidential election in November 1995 and was re-elected in 2000 to a second (and final) five-year term. The Polish President is the commander-in-chief of the armed forces and may veto legislation passed by the Parliament. According to the new Constitution, Presidential vetoes can be overturned by a three-fifths vote in the Sejm.

The most influential political parties are: Democratic Left Alliance (SLD): the largest opposition party in the Sejm, the left-of-center SLD is a coalition comprised mostly of successor parties to the communist-era Polish United Workers Party (PZP R) and is headed by former Minister of Internal Affairs Leszek Miller. The party's leadership generally supports liberal economic policies but stresses the importance of cushioning the harsher effects of economic reform. Civic Platform (PO): a movement, not formally registered as a political party. PO is a center-right grouping established in January 2001 by three influential politicians: Maciej Plazynski, Marshal of the Sejm, Donald Tusk, Vice Marshal of the Senate, and Andrzej Olechowski, former Minister of Finance and Foreign Affairs (in last year's presidential elections he ran second). In a few months they became the second most popular political party in Poland. PO advocates flat taxes, American-style parliamentary elections in single-member districts, and direct election of local government executives.

Solidarity Electoral Action (AWS): the ruling center-right AWS consists of PM Buzek's AWS Social Movement and several smaller parties. Following the defeat of AWS candidate Marian Krzaklewski in the 2000 presidential election, AWS faced serious internal tensions. Two of its ministers left AWS in early 2001 to join the centrist Civic Platform (PO). The Solidarity Union, forming the core of the AWS minority government, formally disassociated itself from AWS in mid-May. An additional group of AWS politicians led by Justice Minister Lech Kaczynski left AWS in June, and took the name Law and Justice (PiS).

AWS won 201 of the Sejm's 460 seats in 1997. Its platform supports privatization and welcomes foreign investment. Prime Minister Jerzy Buzek leads AWS. Polish Peasant Party (PSL): headed by former Deputy Prime Minister Jaroslav Kalinowski. During the communist-era, PSL supported the Communist regime. After 1989 the PSL returned to its pre-1945 origins as a classic European agrarian party.

PSL has tended to advocate statist solutions to the economic problems of rural areas. Freedom Union (UW): like AWS, UW has its origins in the Solidarity movement. UW pursues a mainly socially liberal, pro-free market course. Its membership is a diverse mix of liberal free-market thinkers, intellectuals, and social activists. The party is led by former Foreign Minister Bronislaw Gere mek. Law and Justice (PiS): established in June 2001 from elements of the AWS, PiS is a rightist party led by popular Minister of Justice Lech Kaczynski.

PiS's key slogan is public safety and a "strong and just society". Movement for the Reconstruction of Poland (ROP): a rightist, nationalist party headed by former Prime Minister Jan Olszewski. ROP supports lower taxes, but the party's strong populist wing criticizes privatization and foreign investment. ROP has seen a decline of its fortunes in recent years and now has only a few deputies in Parliament. In the September elections ROP will run on a join list with AWS.

Union of Labor (UP): UP bills itself as an "ideologically pure" social-democratic party advocating a broad social safety net. It is the smallest of the major parties in Poland and had no representation in the 1997 parliament. In 2001 UP signed an election coalition with SLD, and its candidates planned to run in the 2001 election on a joint list with SLD. Chapter 4: Marketing U.S. Products and Services A. Distribution and Sales Channels (1) Regional Nature of Market and Review of Major Regions Opportunities for doing business in Poland are, like the population, dispersed throughout the country. Twenty-five percent of the population resides in rural areas, and urban dwellers are widely spread among a number of population centers.