The Eurasia Center

The Eurasia Center 4927 Massachusetts Ave. NW Washington, DC 20016

www.eurasiacenter.org [email protected]

Poland

Country Report

A Change in Leadership: After eight years of being governed under the centrist, liberal-conservative Civic Platform (PO) political party, in October 2015 the national-conservative Law and Justice (PiS) party won the ballot with 37.1% of the vote1. Although the incumbent Civic Platform has been decidedly pro- Europe, the Law and Justice has lurched Poland into an unprecedented right direction. Led by Euro-sceptic Jaroslaw Kaczynski and in control of both houses of the Polish Parliament, PiS demonstrating an aversion to the migrant crisis that is affecting and troubling the rest of Europe. 2 Being strongly nationalist, the party has expressed support for campaigning against refugees and for economic populism, while also displaying a distrust of the EU and Germany. Additionally, international observers are saying that the party is slowly but systematically destroying rule of law within the nation.3 Despite the seemingly adverse internal conditions, Poland is showing greater regional cooperation in the face of Russian aggression. Evidence of this can be seen by the fact that Poland continuously supports Ukrainian efforts in the East, as well as the recent completion of the Polish-Ukrainian-Lithuanian brigade.4

Path to EU Accession: After over forty years of communist rule, Poland became the first Central and Eastern European nation to rid itself of communism and hold free elections in 1989. These monumental elections were made possible by the Roundtable Talks that resulted from the Solidarity trade union movement. The following years of “shock therapy,” a rapid program of economic privatization and market liberalization, began a transition that has developed Poland to stand out as a success

1 http://www.bloomberg.com/news/articles/2015-10-25/poland-ousts-government-as-law-justice-gains-historic- majority 2 http://fsrn.org/2015/10/polands-conservative-law-and-justice-party-sweeps-to-power-on-anti-refugee-rhetoric/ 3 https://www.theguardian.com/world/2016/jul/27/poland-rule-of-law-systematic-threat-european-commission 4 http://www.businessinsider.com/ap-polish-lithuanian-and-ukrainian-brigade-to-be-ready-in-2017-2016-1 story among transition economies. Poland joined NATO in 1999 and the European Union in 2004. It is the only country in the European Union to avoid a recession through the 2008-2009 economic downturn, although GDP per capita is still much below the EU average.5 The coalition government has moved slowly on enacting business-friendly reforms, increasing workforce participation, reduction public sector spending growth, lowering taxes, and privatizing industry. However, if Poland were to address some of its deficiencies in infrastructure and its business environment, its economic performance could increase.

Economic Indicators: . Poland currently boasts a GDP of $1.052 trillion, which ranks 25th in the world.6 . Economic growth and privatization of large state-run companies have given rise to the establishment and expansion of small and medium sized enterprises (SMEs).7 . Despite a steady GDP growth, Poland’s exports have decreased from $190.8 billion in 2015 to $188.3 billion in 2016.8 . At the moment, Poland does not use the euro currency and does not have a target date to adopt it and replace the zloty, despite being in the European Union.

Graph above: Polish Government

5 2012 CIA World Fact book 6 2017 CIA World Fact book 7 Polish Agency for Enterprise Development, “Small and Medium Enterprise Sector” Report, 2005.: http://www.parp.gov.pl/dotacjedoc/ulotki/stan_sektora_ang05.pdf 62017 CIA World Fact book 8 Graph above: The Economist, comparative economic indicators. Current as of February 2017. Economic Structure: . Unemployment: 9.6% (112st in the world) 9 . GDP by sector- agriculture: 3.7%, industry: 38.5%, services: 58.9%10 . Polish export commodities are broken down as follows: machinery and transport equipment 37.8%, intermediate manufactured goods 23.7%, miscellaneous manufactured goods 17.1%, food and live animals 7.6%.11 . Poland’s main trading partner is Germany, which is the recipient of 27.1% of Polish exports and accounts for over 27.6% of Polish imports.12 . Since acceding to the EU in 2004, Poland has received $13.9 billion in EU structural funds, which will continue to flow in the future. To that end, the Polish government published a draft National Development Plan to discern how the 2007-2013 structural funds will be spent.13

Political Considerations: . President, chief of state: Andrzej Duda . Prime Minister, chief of government: Beata Szydlo . A bi-cameral legislature made up of the Sejm (lower house) and the Senate (upper house), as well as a strong executive headed by the president, constitutes Poland’s democratic political system. . Power is also distributed to 16 local provinces known as “voivodships”. . Tax policy must be approved by Parliament—the current Corporate Income Tax rate is 19%, tax on dividends is also 19%, and the EU Value-Added Tax basic rate on goods and services is 22%.14 . The Poland National Bank coordinates monetary policy—and its chairman (currently Adam Glapinski since 2016) is appointed by the Sejm for six-year terms. . In regards to foreign investment regulations, Polish officials note, “Polish law allows 100 percent foreign ownership of domestic businesses, but there are limits on a few sectors, including: air transport (49 percent); radio and television broadcasting (49 percent); and gambling (0 percent).”15

Attractions: . Diversified market: Poland is a very interesting place for foreign investors. Its population is almost 40 million, it contains a diversified economy in terms of sectors, and features easy access to Eastern and Western Europe and ambitious employees.16 . Low risk: Poland offers safe environment for undertaking economic activity and long-term planning (stable prices, permanent GDP growth), and has a very low risk of a financial crisis

9 2017 CIA World Fact book 10Ibid 11 Ibid. 12 Ibid. 13 A copy of the 2007-2013 National Development Plan is available at the following link: http://www.funduszestrukturalne.gov.pl/English/National+Development+Plan/ 14 Deloitte, & Polish Information and Foreign Investment Agency. (2004). How to do business: Investor’s guide to Poland. Warsaw: Palilz. 15 http://www.heritage.org/research/features/index/country.cfm?id=Poland 16 http://www.paiz.gov.pl/poland_in_figures (public sector debt amounts to 44.7 % GDP while the EU 27 average equals 80.0% GDP).17 In addition, it offers investment possibilities resulting from modernizations of infrastructure and implementations of modern technologies in corporations.18 . EU membership: Access to the single market, allocation of EU structural funds (see above).

Demographics: . Poland boasts a largely homogenous population (96.9%) of 38,523,261 which is declining at a rate of 0.09%. Poles are predominantly Roman Catholic (87.2%) and ethnically and linguistically Polish (98.2% respectively).19 . The majority of the population (60.5%) resides in towns and cities, yet a significant rural population remains. In fact, urbanization is annually decreasing at a rate of 0.1%.20 . Life expectancy at birth is 73.7 years for males and 81.7 for females.21

. Poland boasts a younger population, as the age structure consists of 16.26% for those over 65 years, and 83.74% for those younger.22

. Poland currently spends close to 6.4% of GDP on health, which is necessary to ensure a large and productive workforce.23

Education . The Polish education system is composed of both public and private schools, with total governmental spending on education amounting to 4.9% of GDP. Due to this, the population has a 99.8% literacy rate, defined as being able to read and write after the age of 15.24

Source: Skrwa River:http://poland.pl

17 2017 CIA Fact book 18 http://www.paiz.gov.pl/poland_in_figures 19 2017 CIA World Fact book 20 http://www.fao.org/countries/55528/en/pol/ 21 2017 CIA World Fact book 22 2017 CIA World Fact book 23 Ibid. 24 Ibid. Geography/Natural Resources: The negative economic effects of communism naturally spilled over to the environmental realm. Heavy industrialization—focused on industry and workers much to the detriment of the environment—left its mark on Poland. However, the situation has improved since 1989 due to decline in heavy industry and increased environmental concern by post-Communist governments; air pollution nonetheless remains serious because of sulfur dioxide emissions from coal-fired power plants, and the resulting acid rain has caused forest damage; water pollution from industrial and municipal sources is also a problem, as is disposal of hazardous wastes.25 Pollution levels should continue to decrease as industrial establishments bring their facilities up to EU code, but at substantial costs to businesses and the government. The result is a cleaner Poland, but the work is far from finished.

. Located in Central Europe, Poland borders Belarus, the Czech Republic, Germany, Lithuania, Russia (Kaliningrad), Slovakia, and Ukraine. . Poland maintains a land area of 312,685 square kilometers—roughly the size of New Mexico.26 . The terrain is low-lying and relatively flat, with three main mountain ranges in the south: the Carpathians, the Holy Cross Mountains, and the Sudetan Mountains.27 . Water area is 8,430 square kilometers; Poland has 9,000 lakes—which take up 1% of the landscape—and over 29 rivers in Poland, the longest being the Vistula (1047km).28 . Poland is blessed with bountiful natural resources including: amber, arable land, coal, copper, lead, natural gas, salt, and silver.29 Current reserves of coal amount to roughly 45.4 billion tons, which produces—along with pollution—around 95% of the nation’s electricity.

Agriculture . While agriculture employs over 12.6% of the workforce, it accounts for less than 3.7% of Polish GDP. In addition, food and live animals constitute 7.6% of exports.30 . Key agricultural products include: potatoes, poultry, wheat, pork, eggs, fruit, vegetables and dairy.31

Picture Above: http://www.trekearth.com/gallery/Europe/Poland/photo397064.htm

Relevant Environmental Laws and Regulations:

Kyoto Protocol . An international agreement in which adherents voluntarily sign up to limit their carbon emissions in an effort to reduce global warming. Nations can buy and sell emission credits in order to fulfill their pledge.

25 2017 CIA World Fact book 26 2015 CIA World Factbook 27 http://www.poland.gov.pl/Topographical,features,282.html 28 http://www.nationmaster.com/encyclopedia/Rivers-of-Poland 29 2015 CIA World Factbook 30 2015 CIA World Factbook 31 Ibid. . Poland signed the treaty in 1998 and ratified it in 2002. . Experts predict CO2 emissions in Poland should be 30% lower than those in 1988, and sales of these leftover emission credits could amount to $500-$700 million.32

Environmental Protection Act http://www.mos.gov.pl/mos/akty-p/dostep_eng.html . The Polish government adopted the Environmental Protection Act in 2001. . Underpins environmental standards under the “polluter pays” principle, attempting to safeguard the environment from air and water pollution. . Includes the right of popular access to environmental information.

Urban Waste Water Treatment Directive http://ec.europa.eu/environment/water/water-urbanwaste/directiv.html . The then European Community enacted this directive in 1991, laying out the requirements of EU states for waste water treatment. . The directive is an attempt to create a system of monitoring and periodically reviewing water treatment, as well as constructing water treatment facilities and urban waste water collecting systems. . The European Commission offers financial grants to NGOs for assistance in implementing the various sections of the UWWTD.

Water Framework Directive http://ec.europa.eu/environment/water/waterframework/index en.html . EU legislation on water policy, which began in 2000 and seeks to ensure water quality across Europe.

Current Funding Projects: . The European Commission observes, Poland needs €22-45 billion to raise environmental standard, but the benefits of an improved quality of life and health savings is €41-208 billion a year by 2020.33 . Currently, Polish environmental spending, chiefly through the National Fund for Environmental Protection and Water Management, is 1.7% of Poland's gross domestic product.34

The EcoFund . A “debt for environment” swap, which originated in 1992 and allows for a percentage of the Polish debt to be transferred to fund environmental projects in Poland.35

Joint Comprehensive Baltic Sea Environmental Action Program . Directed by the Helsinki Commission (HELCOM), the program is granted funds from the National Fund for Environmental Protection and Water Management.

32 http://www.eia.doe.gov/emeu/ cabs/polenv.html 33 http://ec.europa.eu/environment/water/water-urbanwaste/index_en.html 34 http://www.europa.eu/scadplus/leg/en/lvb/e15106.htm 35 “Swapping Debt for the Environment: The Polish EcoFund”, 1998 OECD Report. . Seeks to combat water pollution in the Baltic Sea by identifying troubled areas, or “hot spots”, which this program monitors and grants assistance (a map of these hot spots is available online).36

Carpathian EcoRegion Initiative . Led by a group of NGOs from seven Carpathian nations (Hungary, Slovakia, Czech Republic, Poland, Romania, Ukraine and Serbia & Montenegro), the initiative seeks to conserve the Carpathian mountain range. . The main projects in Poland are funded by the “Time for the Carpathians” Initiative conducted by the EPCE Poland, Foundation for the Conservation of the Biodiversity of the Eastern Carpathians and WWF. For more information: http://www.carpathians.org/l_pol.htm

National Program for Urban Waste Water Treatment . A government program, created in 2003, which distributes financial grants for the creation of water treatment plants and wastewater collection systems. It is designed to fulfill the requirements of the EU Urban Waste Water Directive. . By the year 2015, the program will have provided aid to construct, extend and modernize urban water treatment plants and main collecting systems in 1,378 agglomerations.37

Acknowledgements:

Research and Data Development Provided by Juliana Kogan, Tara Jakubik, and Alexander Murawski, Research Assistants under the Supervision and Coordination of Dr. Janco, President, The Eurasia Center/EBC.

36 http://www.helcom.fi/stc/files/Projects/JCP/TOTAL%20hotspotsAUG2005.pdf 37 http://www.unep.org/GC/GC23/documents/Poland_corrected.doc