Finding market opportunities in

POLAND

International Business

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10StargardSzcecinski

OstrÛwWielkopolski

Brest-Litovsk

Jelenia GÛra

Lomza

Legnica

Pabianice

Tczew

Zgorzelec

Zielona GÛra

Bielawa

Chojnice

StarogardGdanski Malbork

Stalowa Wola

Swidnica

Szczecinek

Wejherowo

Wolin

Zary

ZyrardeÛw

SopotGdynia

Gniezno

Lubin

ChrzanÛw

Cieszyn

Oswiecim

Tarnowskie GÛry

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Tychy

Kaliningrad

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Ilawa

Stary Sacz

Suwalki

OstrolekaTorun

Koszalin

Slupsk

Pila

Inowroclaw Wloclawek

Grudziadz

LesznoKalisz

Konin

Walbrzych

Boleslawiec

GlogÛw

PiotrkÛwTrybunalski

Sieradz

Skierniewice

Plock

Czestochowa

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Siedlce

Zamosc

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BialaPodlaska

OstrowiecSwietokrzyski

Pulawy

ElblagKolobrzeg

KrosnoPrzemysl

Jaroslaw

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Wodzislaw Slaski

Nowy Sacz

DabrowaGÛrnicza

Klodzko

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Opole

Katowice

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RzeszÛw

Kielce

KrakÛw

Szczecin

Wroclaw

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Poznan

PruszkÛw

Warszawa (Warsaw)BELARUS

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100 km

Map No. 3784 Rev. 3 UNITED NATIONSMarch 2000

Department of Public InformationCartographic Section

National capitalDistrict centreOther cityInternational boundaryDistrict boundaryMain roadRailroadCanalAirport

The boundaries and names shown and the designations usedon this map do not imply official endorsement or acceptance by the United Nations.

Kujawsko-PomorskieLÛdzkieLubelskieLubuskie

MazowieckieOpolskiePodkarpackiePodlaskiePomorskie

WielkopolskieZachodniopomorskie

123456789

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DISTRICTS OF POLAND

Ca r p a t h i a n M o u n t a i n s

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1

About International BusinessInternational Business (IB) is an annual Project carriedout by students attending the Norwegian University ofScience and Technology (NTNU), the Norwegian Schoolof Economics and Business Administration (NHH) and theNorwegian School of management (IB). The main pur-pose of the project is to study potential markets for inter-national business ventures, and support Norwegianenterprises entering these markets. Since its beginning in1984, IB has visited all continents. Every year, with thesupport from the Norwegian Trade Council, IB selects aforeign emerging market to focus on.

Events and developments beyond our borders areessential to a small country like Norway. Globalisationpulls foreign markets and the opportunities they offercloser to us. To take advantage of these opportunities,information and knowledge is essential. IB's primary goalis to provide information on all these areas that areimportant to enterprises wanting to set up business orinvest in a foreign market.

IB also develops the participating students' internationalawareness and skills, and is a forum for contact with thebusiness sector. The findings of the report are based onmeetings with companies and institutions in the countryfocused on, in addtion to extensive research prior to ourstay abroad. The whole project is finaced throughadvertisements in our report. We would like to thank allour sponsors for their support, which is essential for IB toaccomplish our goal of producing a usefull report.

In addition to the paper-copy, the report is also avai-lable on our web-page: http://www.ib.no. Some previ-ous year's reports are on these pages as well and furtherinformation about the IB project.

International Business is an independent student organi-zation, and is fully responsible for the content in thisreport.

2

FOREWORD

I welcome this in-depth study of market oppor-tunities in Poland - a country with which Norwayhas close political, military, economic, culturaland commercial relations.

Both countries are members of inter alia NATO,OECD and WTO. The Norwegian Governmentsupports the expansion of the European Unionand has initiateda Plan of Action with a view to developing fur-ther co-operation with the candidate countries.Within the framework of this plan a number ofjoint projects have been launched in Poland inthe fields of fisheries, environment, health, gen-der equality and local democracy. OncePoland will be a member of the EuropeanUnion; she will also be part of the EuropeanEconomic Area (EEA), of which Norway is apart. The EEA Agreement ensures free trade inindustrial products and free movement of capi-tal, services and persons by means of joint legis-lation.

Maritime affairs are important to Norway. Wehave one of the world's largest merchant fleets.On Norwegian ships there are more than 3,700Polish seamen, including 1,600 officers. Currentlythere are twelve Norwegian ships that are onorder or being built at Polish shipyards.

More than 30 per cent of the Norwegianexports to Poland consist of fish, mainly herring,mackerel and salmon. A large part of theNorwegian fish is being processed at Polish fac-tories and thus creates jobs. With a view topromoting further contact and dialogue a JointCommission on Fisheries has been established.

Norway presently exports 0.5 billion cubicmetres (bcm) of natural gas annually to Poland.On 3 September 2001, the Polish Oil and GasCompany and five companies operating onthe Norwegian continental shelf signed along-term agreement according to whichNorway will supply Poland a total of 73.5 bcmover a period of 16 years as from the year 2008.This agreement paves the way for the buildingof a dedicated pipeline from the North Sea toPoland. Norway is the 17th biggest investor inPoland. Among the biggest ones are(in alphabetical order) Borgested Fabrikker, DetNorske Veritas, Hydro, KLIF, Norgips, Orkla,Qubus, Rema 1000, Statoil, Telenor and UlsteinHolding. With Poland as a member of theEuropean Union, the Norwegian interest ininvesting in this country will probably increase.

The Norwegian Government sees culture as anintegral part of the country's foreign policy.Therefore, art and trade go together. TheEmbassy is involved in a number of Norwegiancultural projects in Poland in the areasof music, literature, theatre and art exhibitions.

Sten Lundbo

Ambassador of Norway to Poland

3

Poland is an importantmarket for Norwegiancompanies and theinterest has increasedsubstantially overthe last years. The totaltrade in year 2000 was5,7 billion NOK, up 16%from the previous year.NorwegianTrade Council (NTC)inWarsaw which opera-tes as the CommercialSection of The RoyalNorwegian Embassyreports also that

Norwegian investment in Poland has increasedover the last years. Fish makes up roughly 35percent of Norwegian export to Poland andgas is expected to come up as a good num-ber two in the future. Apart from thisNorwegian export and business activities in thePolish market are quite varied and compre-hensive. Norwegian Trade Council in Warsawencourages in particular companies workingwith information- and environmental technolo-gy,construction and building materials as wellas real estate to have a closer look at thePolish market.

Poland is expected to become an EU memberin the nearest future, which entails easier mar-ket access and lower risks. Poland with 40 milli-on people, is situated in the heart of Europeand may become a key European businessarena and a transit country.

NTC looks at Poland with great enthusiasm andoptimism. For Norwegian companies the Polishmarket is a market of opportunities and wewish and hope that NTC Warsaw with its pre-sence will continue to support the successfulestablishment and growth of Norwegian busi-ness in Poland.

It is a great pleasure forme as Ambassador ofPoland that this/next yearannual InternationalBusiness project will focuson Poland. Norway andPoland share not onlycommon history dyringthe last century but areclose allies in NATO andcooperate politcally andeconomically in creatinga new Europe.The recent decade hasbeen particularly dyna-mic and favourable forthe development of

increased Polish-Norwegian economic relati-ons, especially in the areas of shipbuilding, sea-food and fish-processing industri, retail tradeand ecological technologies.

A special aspect of our economic cooperationis a gas contract planned to start delivery in2006.

The timely choice of Poland as the theme forthis/next year`s International Business reflectsgreat opportunities of the growing economicrelations between Poland and Norway.opportunities of the growing economic relati-ons between Poland and Norway.

Acknowledgements

4

Part 1GENERAL BACKGROUNDPOLITICS 8

Political SystemParliamentary System

National AssemblyThe President and theCouncil ofMinistersRegional Administration

Ten Years of Economic TransformationPolitical Forces and PartiesPolitical IssuesForeign PolicyChanging Relations

EU Membership

ECONOMY 12

Economic HistoryEconomic Reforms and theEU Membership NegotiationsCopenhagen CriteriaConsequences of the PolishEU Membership forNorwegian CompaniesForeign Direct Investment FDI Inflow to PolandThe Main Sectors of PolishEconomyGDP

Foreign Trade

Improvments in the Competitvness of

ExportsLabour MarketUnemployment

Mismatch Problem

Wages and Salaries

Consumer Price Index and Household

Income

SOCIETY AND CULTURE 18

A Brief History of PolandModern TimesReligion in PolandPeoplePopulation

Language

EducationBusiness CultureConduct

Gifts and Corruption

Bureaucracy

Food and Drink

Criminality

TECHNOLOGY 24

Industry

Heavy Industry

Construction

AgricultureFood ProductionBanking and FinanceTelecommunicationsGSM

Software

InternetMediaTelevision

Radio

NewspapersElectricity

Part 2FRAMEWORK FORDOING BUSINESSSETTING UP BUSINESS 32

Why Invest in Poland? Outline of the Process ofSetting up a company Business LawMarket and Advertising

Advertising

Fairs and ExhibitionsSpecial Economic Zones15 Locations

Tax Excemptions

Planned Government AmendmentsInvestment Incentives

THE LEGAL FRAMEWORK 36

Basic Legal InformationSetting up Foreign Activities

Corporate Income Tax

Personal Income Tax

VAT - Rates and Regulations

Accounting and Auditing

Social Security Insurance

Double Taxation Treaties

Local Taxes and Charges

Real Estate

Bankruptcy and Insolvency

BANKING AND FINANCE 40

The Polish Banking Sector Polish Banks Characteristics

The Polish Currency (PLN) and Interest

Rates FinanceWarsaw Stock Exchange

The National Bank of Poland

Future Prospects

SUPPORT FACILITIES 46

The Embassy and Consulate The Royal Norwegian Embassy

Embassy of the Republic of Poland

Royal Norwegian Consulates in Poland National Resource Centres Norwegian Trade Council Polish Agency for ForeignInvestment Export Financing and Insurance

The Norwegian Guarantee Institute for

Export Credits

Eksportfinans ASA Norwegian Funds andSupport Organizations The Norwegian Industrial and Regional

Development Fund

The Nordic Industrial Fund

The Industrial Development

Corporation of Norway

HUMAN CAPITAL 50

Facts on Getting Labour toNorway Current Situation

Future Possibilities

Legislation Analysis of the PolishWorkforce Unemployment Cost of Labour Social Security Contributions Productivity Working Conditions Legislation Employment contract

ForeignersRecruitment

TRANSPORTATION INFRA-STRUCTURE 58

Transport System

Means of Transport

Road Construction

Part 3INTERESTING SECTORSENERGY AND ENVIRONMENT 62

Coal

Natural Gas

Contents

Oil

Electric Power

Privatization

Liberalization

Poland and EU Energy PolicyENVIRONMENTAL ISSUESMarket Characteristics

Waste Treatment

Water Quality/Wastewater

Management

Air Pollution Control

EU

Financing

The EcoFund Foundation

FISH EXPORTS AND INDUSTRY 70

The Polish marketNorwegian ExportCharacteristicsExporters, transport and importers

Norwegian fish exported

Herring

Other white fish and pelagic fish

Salmon

Other species /seafoodConsequences of a futureEU-membership forNorwegian fish exportersThe fish processing industryMarket structure

Production and sales

The Norwegian RoleDomestic Production

SHIPBUILDING 80

An important industry

Shipyards

Market Structure

Characteristics of Polish Shipyards

Trends in the industry

Offshore deliveriesSupplies to Polish shipyardsMarket opportunities on the ship’s

equipment market

How to enter the market

THE CONSUMER RETAIL MARKET 86

ConsumerPrice and Brand Name

Income

Country of Origin Effects

Influence of Children

Consumer SpendingMarketingAdvertising

Key Factors for the Marketing StabBrand LoyaltyLocalization and Shopping

Distribution Structure

Developments in the 1990s

Fragmented structure

Development trends

Products with PotentialExport Products

Producing LocallyCompetition

IT - TELECOMMUNICATIONS 94

Wire Telephony

Cellular Telephony

InternetTelecommunicationsMarket Trends and NumbersCommunicationsTelecom Services

Regulatory Framework

Infrastructure

Range of Services

Mobile Services

Competitive Analysis

Sales Prospects

Market Access

End User ProfileInternetMarket Overview

Internet Security

E-Commerce and Security

Market Trends

Legal FrameworkE-CommerceGeneral overview

B2B E-commerce

B2C E-commerce

Major Trade Events

PROJECT MEMBERS 102

5

6

Anna B. Kisiel-Lowczyc

University of Gdansk

POLAND'S FUTUREIN UNITED EUROPEPoland took a course for European Unionat the beginning of the previous decade,as the process of transition started. Thesuccessive stages were marked by thepreferential bilateral agreement on coo-peration and the European Treaty of1992, bringing Poland closer to accessionnegotiations, which started in March 1998.At that time accession negotiations werealso started by Cyprus, the CzechRepublic, Estonia, Slovenia, Hungary (TheLuxembourg Group), and in 2000 bycountries of the Helsinki Group: Bulgaria,Lithuania, Latvia, Malta, Rumania,Slovakia. As at 31 December 2001, coun-tries of the Vysehrad Group are mostadvanced in negotiations, having closedrespectively: Hungary – 23, the CzechRepublic – 22, Slovakia – 20 and Poland –20 of the 29 chapters.

The rules were made clear at the Laakensummit – the countries that will have com-pleted the negotiations by the end of2002 will join the Union in 2004. Of the chapters negotiated by Poland,the most difficult, most important andsocially sensitive are agriculture as well asregional policies and coordination ofstructural instruments, followed by freemovement of capital and people, andthe policy of competition.

The process of harmonisation and imple-mentation of the European Law is welladvanced in Poland, even though publicsupport for membership (ca. 57% - 31Dec., 2001) is lower than in the CzechRepublic or Hungary (66 and 77 per centrespectively). The intensive negotiations inBrussels are accompanied by EU informa-tion at home – of the costs and benefits,where the micro- level is most essential.The costs and benefits of enlargementare also an issue for the EU and its recessi-on-stricken member countries.

The European Union is a success story.What kind of Union will Poland become amember of? In the wake of enlargementthe Community must determine its prioriti-es and future course of development. The

future of Europe will be debated on 28February 2002 by the Convention, whowill have one year to complete its task ofdrafting the EU institutional reform. Theforum is composed of representatives ofboth, EU members and applicant countri-es (from Poland: secretary of theEuropean Integration Committee DanutaHubner, Józef Oleksy, MP and senatorEdmund Wittbrodt). The Polish delegatesare to present proposals and ideas enjoy-ing public support in Poland, and to stressthe significance of Poland as a countrythat will soon be among the six largestmembers of the EU.The debate on the future of the EU and ofEurope is closely connected with theterms of our membership; it is also a natio-nal debate on our part in the Europeanintegration. The accession is a measure ofPolish patriotism today – it is in ourEuropean interest.

EU countries should be able to see furtherthan the immediate budgetary interestsand think about the future of the Unionafter the enlargement, seeking a way ofstrengthening the economies of newmembers. In reforming EU institutions thegist is to bring them closer to the peopleand make them more efficient, in order todeal with the "deficit of democracy." Inthe longer run, what should the Union be:the United States of Europe, a federationor a Europe of Homelands?The EU enlargement by 10 new membersplanned for 2004 is the greatest challengeto date. The Union should certainly remainfunctional. As much diversity as possible –as little uniformity as necessary.

Part 1•Politics•Economy•Society•Technology

POLITICAL SYSTEMPARLIAMENTARY SYSTEM

The republic of Poland is a democraticstate ruled by law. The constitution pas-sed on 2 April 1997 implements the princi-ples of the supreme law of Poland. Thegovernment is based on the separation ofand the balance between legislative,executive and judicial power. Legislativepower is vested in the Sejm and theSenate, executive power is vested in thePresident and the Republic of Poland andCouncil of Ministers, and the judicialpower is vested in the courts and tribu-nals.

NATIONAL ASSEMBLYThe name of the National Assembly inPoland is the Sejm. In accordance withthe Constitution the Sejm and the Senateof the Republic of Poland have the legis-lative power. The Sejm is elected to afour-year term in general elections. It con-sists of 460 deputies. The highest controlorgan in the state is the Control Council,which reports to the Sejm. The bodies ofthe Sejm include the Presidium of theSejm, the Council of Seniors and parlia-mentary committees. Deputy clubs arethe main forms of the political organizati-on of deputies within the Sejm. TheSenate is also elected to a four-year termin general elections. It is composed of 100senators. The constitution specifies majorissues on which the Sejm and Senatedebate jointly at sessions presided overthe Speaker of the Sejm acting as theNational Assembly.

THE PRESIDENT AND THECOUNCIL OF MINISTERSThe President of Poland is elected to afive-year term in general elections, andcan only be re-elected once. Since 23December 1995, Aleksander Kwasniewskihas been President. He is the supremerepresentative of the state, monitoring theobservance of the Constitution and thesecurity of the state. The Presidentappoints the Prime Minister, and LeszekMiller was appointed after the election inSeptember 2001. The executive body forthe President is the Chancellery. TheCouncil of Ministers includes the chair ofthe Council of Ministers (the PrimeMinister) as its head, vice-premiers of theCouncil of Ministers, and ministers. The

Government is responsible for the domes-tic and foreign policy of the state. TheSejm extends a vote of confidence forthe government [FTRI].

REGIONAL ADMINISTRATIONSince 1 January 1999, a three-tier territori-al division of the state has been in force.This divides Poland into voivodships (pro-vinces), land powiats (administrative dis-tricts) and gminas (districts). In all thereare 16 voivodships, 308 land- and 65urban powiats (towns having the right ofdistricts) and 2 489 gminas.

The gmina is the principal unit of territorialdivision. The constitution guarantees thepriority of the gmina in the managementof local affairs. The gmina is responsiblefor things such as primary schools, kin-dergartens, libraries, and local transporta-tion, water supply and health protection.

The powiant is the second-tier unit of terri-torial division, comprising a number ofgminas. The authorities of the powiatinclude the powiant council, elected inlocal-government elections, and theboard of the powiant. Powiants areresponsible for such matters as protectionof public order and security, flood andfire protection, social security and mainte-nance of general hospitals. The voivods-hip is the largest territorial unit. Its authoriti-es include the Sejmik, the voivodship parli-ament chosen in local-government electi-ons, and the board of the voivodship. Themarshal of the voivodship heads theSejmik and the board. The voivodship isresponsible for matters related to regionaldevelopment. It prepares and imple-ments strategies, creates conditions foreconomic development in the region.Acting within the framework of regionalcooperation it can maintain contactswith communities from other countries[FTRI].

TEN YEARS OF ECONOMIC TRANS-FORMATIONThe June 1989 parliamentary electionsconstituted a breakthrough in the post-war political history of Poland, eventhough communists guaranteed themsel-ves a formal majority in the Sejm(“Solidarity” gaining an absolute majorityin the Senate) as a result of the “roundtable” talks. In the autumn of that year,the first postwar noncommunist govern-ment was established. That government

Politics

8

inherited a distorted economic structurefrom the previous system. The dominationof state ownership and the prevalence ofheavy industry as well as poor develop-ment of consumer goods production andthat of the service sector being typicalcharacktristics. The mechanism of econo-mic planning and of central economicdecisions, particularly in the field of invest-ments, led to a high degree of concen-tration and monopolization of productionwhich made development of the compe-titive environment very difficult [FTRI]. Afterthe large-scale changes in 1989/90, aperiod of three to four years was neededfor consolidation before rapid growthstarted.

POLITICAL FORCES AND PARTIESIn general, it is quite hard to understandthe Polish political landscape. At everygeneral election held in the last ten years,new parties and alliances have appea-red and others have disappeared. Thiswas a result of many politicians changingopinion and creating new strategic allian-ces, as well as some new entering. Whenit comes to the positioning of the partiesin either the left or right wings, the pictureis not as clear as in other countries. All thisseems to be the signs of a new politicalsystem becoming more settled. The onlyparty that has been stabile regardingpolitical direction and representation in

the Sejm has been the Democratic LeftAlliance (SLD).

The landscape of the social partnersreflects the same development in the sys-tem. Many small trade unions are found inall industries, and they play a relativelyimportant role both in national politicsand at the enterprise level. There aresome federations of sectoral trade unionsand the most powerful are those in largestate-owned enterprises.

After the election to the legislature inSeptember 2001 no party won an outrightmajority. A coalition government was for-med by the SLD and the Labour UnionParty (UP). Here, the former communistparty SLD became the party with mostrepresentatives in the Sejm. Leszek Millerof the Democratic Left Alliance tries tomould politics for Poland based on socialdemocratic thought. The second largestparty in Poland is the Liberal Party, PO.The nationalistic Self-Defence Party underthe leader of Andrezej Lepper has alsogrown to be a party of influence after theelection in 2001.

POLITICAL ISSUES

The issue of most concern in Polish politicsis the high unemployment rates. As in allother former communist countries this isdue to privatization and downsizing.Especially in the agricultural sector many

9

Solidarity Electroal Action

Freedom Union

Movement for Reconstruction

League of Polish Families

Law and Justice

Civic Platform

Self-Defence

German minority

Peasant Party

Democratic Left Alliance

20011997

Poland´s lower house, seats (total 460) 1997-2001

Figure Politics 1 Source [The Economist]

people have lost their jobs, and additio-nal efficieny measures are expected infuture EU membership. The high numberof young people entering the labour mar-ket is increasing the extent of this pro-blem, and Prime Minister Miller has promis-ed to “prepare legal solutions and eco-nomic encouragement which should faci-litate the employment of school and uni-versity graduates and setting up their ownbusiness” [WV1]. The regional differencesin unemployment rates are enormous. Thisreflects regional differences in general. Inshort it seems like the areas around thelargest cities and in the southwest are themost prosperous whereas the northeast issuffering low growth. The government hasannounced labour market reforms withthe goal of making the labour force moremobile.

Crime is also a hot issue in Polish politics.Over the last years few organized crimeand corruption have increased, accor-ding to the officials. It is high priority tofight both, and this has been donethrough strengthening the police andmaking the system more transparent. Thegovernment and the World Bank haveput down an anti-corruption group. Thisgroup has stated four strategic objectives,which the government is to implement init's politics; limiting the influence of thestate on the economy; reduce publictolerance for corruption; effectivze institu-tions and public administration; and raisethe effectiveness of the detection of cor-ruption crimes and strengthen anti-cor-ruption control functions of state instituti-ons. When it comes to other kinds of crimi-nal activity, the largest problems aredrugs, prostitution and human trafficking.One of the methods the authorities areusing in their fight against these problemsis making the banking system more trans-parent.

FOREIGN POLICYCHANGING RELATIONSBasically all the foreign contact Polandhad in the period from 1945/49 to the1980s was with other communist countriesin Eastern Europe and the Soviet Union. AsNATO was formed in the West, theWarsaw Pact bounded the East in termsof defence, and COMECON was the eas-tern EC/EU that was established to coordi-nate economic planning. In reality, the

Soviet Union was in power, and the othermembers were placed hereunder.However, among these states Poland wasallowed most independence, opening upfor some minor contact with the West. Ascommunism lost its strength in the eighties,international organizations like theInternational Monetary Fund (IMF) andthe World Bank (WB) were soon welco-med, and they played a central role insupporting the country after the fall of theIron Curtain in 1989. When the WarsawPact was dissolved in 1991, Poland appli-ed for NATO membership, showing theirwillingness to integrate with the West. In1999, Poland became a full member ofNATO. Poland is also in the Organizationfor Economic Cooperation andDevelopment (OECD) and has taken partin a partnership with the EFTA. In generalas the Poles are turning westwards, relati-ons with the East have somewhat deterio-rated, especially with Belarus and Ukrainefollowing the imposition of tighter bordercontrols.

EU MEMBERSHIPEU membership has been one of themajor goals of Poland after 1989. As theMaastricht treaty was signed in 1993 theEU opened up for the enlargement of theunion, and at the same time offering totalintegration between its members. Thisgives a membership additional advanta-ges: better access to a large market;easier imports of equipment and techno-logy; greater opportunities for cooperati-on with foreign businesses and a likely risein living standards. These are majorreasons for about 50 per cent of the Polishpeople being positive to a Polish accessi-on into the union. After having applied in1994, the goal was membership by 2002.A referendum on Polish membership inthe Union is planned to be held in 2003.At the moment Poland will enter theunion at the earliest in 2004 together withnine other applicant countries. Already in1992 a transition agreement concerningtrade between the EU and Poland beca-me effective. The Association Treaty (follo-wing the 1992 agreement) aims at esta-blishing a free trade zone betweenPoland and the EU, and is at the momentonly restricting imports of five strategiccategories of textiles and agricultural pro-ducts.

Although the new government in Polandis split in two with the SLD being for the EU

Politics

10

and the PSL (the farmers party) beingagainst the EU, the majority is succeedingin stressing the importance of members-hip in the Union. In the negotiations withthe EU, 20 out of 29 chapters have beenclosed (January 2002), and the rest mustbe closed during 2002 for accession in2004. A European Commission report onPoland in December 2001 identified thedismal state of public finance as one ofthe main problems in Poland, and conclu-ded that reforms in administration andagriculture are urgently needed. Anotherproblem is corupption. The membershipstatus report 2001 from the EU declared;“corruption is a serious matter of con-sern”[EMB].

The state of agriculture seems to be thehardest to improve. The dependency ongovernmental support and the inefficien-cy of the sector is in conflict with the EU`sCommon Agricultural Policy (CAP).Modernizing the Polish farming will bringenormous costs to the EU and for the far-mers to reach the CAP efficiency levelmany jobs will be lost. Still, changes havebeen put through in all aspects of econo-my and politics: The eastern borders ofthe country have been strengthened asthey will be the borders of the Schengenarea; environmental protection laws arebeing implemented at EU standards; cor-ruption and other crimes are beingfought.

Concerning bilateral agreements, negoti-ations on the sale of land to foreignersand the freedom of employment for Polesafter joining the EU have been the toug-hest ones. Although Germany will notaccept Polish labour into their market for7 years, other agreements with restrictionsonly for 2 years have been signed withDenmark, Sweden, Ireland and theNetherlands. Initially, the Polish negotiatorswere hoping to keep other EU citizens outof the Polish real-estate market for 18years, but they have now accepted a 12-year transition period.

The Polish people at the moment are spiltin two equally sized groups for andagainst the EU, with the “pros” losingsome support. The government does notconsider this as a very serious matter, as itis expected that the Catholic Churchonce again will state its wish for Polishintegration when the referendum drawsnear.

International Business

11

REFERENCES

[FTRI] Foreign Trade Research Institute 2000

[WV1] The Warsaw Voice, 6 January 2002,Marcin Mierzejewski: “2002: WhatPoland Has To Do”

[WV40]The Warsaw Voice, 7 October 2001;“Official Sejm and Senate ElectionReturns” [Online]. URL:<http://www.warsawvoice.pl/v676/News01.html>

[EMB]Meeting with the Royal NorwegianAmbassador Sten Lundbo, Warsaw, 3January 2002

[The Economist]The Economist 27 October 2001

The World Bank Warsaw Office;"Corruption in Poland: Review of prio-rity areas and for proposals for acti-on", 11 October 1999 [Online]URL:<http://www.worldbank.org.pl/html/corruption.html

"How to do business in Poland 2000",United Nations IndustrialDevelopment Organization inWarsaw, August 2000

Meeting with the Norwegian KosulJan Kubiac, Szczecin, 14 January2002

Meeting with Professor Roger Bivand,NHH, 19 November 2001

ECONOMIC HISTORYIn the autumn of 1989, the first post-warnon-communist government was establis-hed headed by the Prime MinisterTadeusz Mazowiecki. The economic sys-tem during the command economy priorto 1989 was characterized by the domi-nation of state ownership, prevalence ofheavy industry and poor development ofconsumer goods production and that ofthe service sector. The former system hasalso created high degree of concentrati-on and monopolization of productionwith the domination of large industrialplants. Central planning of the commandeconomy did not allow for proper resour-ce allocation which resulted in marketshortages such as for consumer goods.Moreover exports were underdevelopedand there was a lack of foreign investe-ment and production links with the exter-nal world.

The beginning of the new times forPoland in 1989 witnessed the appearan-ce of hyperinflation of over 1 500 per centwhich resulted in the ”empty shelves”phenomenon. In this situation the newgovernment adopted a package of lawsand economic policy measures calledthe ”Balcerowicz Plan” after the financeminister Leszek Balcerowicz at the end of1989. This ”shock therapy” changed theeconomic system and the economic poli-cy of the state. It put an end to the sys-tem of central planning in Poland.

Stabilization steps consisted of the follo-wing three lines of action:1. Prices were liberalized.2. Fiscal policy was adopted to decreasethe state budget deficit. 3. Nominal interest rate was raised toreduce credit expansion.

These actions resulted in almost overnightdeparture from the economy of shorta-ges to a balanced market; not only forconsumer goods, but also for capitalgoods and production inputs.The ”shocktherapy” has been criticized for its negati-ve social consequences. However, it con-tributed to the fact that Poland sufferedleast among the post-socialist countries interms of economic growth, being the firstcountry in Central and Eastern Europe toovercome recession induced by the con-sequences of the transformation andenter a stable path of economic deve-lopment.

Transition to the market economy impliedthe following:1. Opening of the economy to newdomestic and foreign entrepreneurship.2. Widespread privatization.3. Radical limitation of the role of thestate in the economy. 4. Continuation of the reforms in the ban-king system started in the 1980s.5. Opening of the economy to the worldin terms of trade and foreign investment.6. De-concentration and demonopolizati-on of production.

It is interesting to note that this transfor-mation in Poland took place in a complexsocio-political context that sometimes isreferred to as the ”Solidarity Paradox”.Unlike other former post-communist coun-tries, the transformation in Poland was tolarge extent encouraged by the politicalopposition embodied in the form of the”Solidarity” social movement. ”Solidarity”had its roots in the working class of thelarge socialist production enterprises, suchas the shipyards and mines.

Concerning more recent developments,in early 1999 the government initiatedfour large systemic reforms: 1. Administrative reform of the countryaimed at giving more administrativepower to the districts.2. Reform of the pension system.3. Reform of the health care system.4. Reform of the educational system.

These reforms are accompanied by arestrictive fiscal policy and reduction inthe share of the budget in the grossdomestic product. Finally the governmenthas abandoned the fixed rate policy infavour of a ”crawling devaluation” in rela-tion to a basket of currencies.

ECONOMIC REFORMS ANDTHE EU MEMBERSHIP NEGOTIA-TIONS COPENHAGEN CRITERIAPoland opened membership negotiationswith the EU in March 1998. Two economiccriteria are most central for assessing theprogress of the economic reforms inPoland. These are referred to as”Copenhagen criteria” the first one beingthe degree to which a country has a

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functioning market economy. The secondone is the capacity to cope with compe-titive pressure and market forces withinthe Union.

When it comes to the first criterion the lastreport of the European Commission fromNovember 2000 has concluded that:• Poland continues to improve its functio-ning as an open market economythrough prudent macroeconomic policiesand implementation of various types ofstructural reforms.• There is, nevertheless, divergence con-cerning the speed at which reformsshould be conducted, e.g. the govern-ment has delayed decisions on the finalliberalization of capital inflows underPoland’s OECD commitments.• The very significant widening of the cur-rent account deficit constitutes the mostpressing challenge for Poland’s economicpolicy.• The high level of unemployment repre-sents another significant policy challenge.• Progress in reducing inflation frommoderate to a lower level is proving diffi-cult.• Significant progress has been made inthe area of tax reform.• The privatization programme is beingimplemented forcefully and successfully.• Prices have been largely liberalized,with the exception of electricity and cen-tral heating, which are still subject todirect regulation.• There are no significant legal or instituti-onal barriers to the establishment of newfirms in Poland.• Barriers still remain on the closing downof firms, especially in the case of bank-ruptcies.• Property rights are clearly establishedand transferable.• The financial sector is developing andthe banking sector has remained funda-mentally sound since the middle of the1990s.• The advanced stage of privatization inthe banking sector is one of the key fea-tures of the Polish economy, and one ofits major strengths.

The conclusion is that Poland is a functio-ning market economy. It has maintainedan adequate degree of domestic andexternal macroeconomic stability and itsgrowth performance has been impressi-ve. Yet some of the challenges mentio-ned above remain to be tackled.

When it comes to the second criterion,the European Commission has concludedthe following: • Poland’s now well-entrenched marketeconomy continues to allow agents tomake decisions in a climate of stabilityand predictability.• Poland needs to continue building ahigh quality infrastructure to enhance itscompetitiveness and avoid bottlenecks(notably in the transport infrastructure) tosustained growth in the medium term.• Foreign direct investment inflows are sig-nificant and play a major role in the pro-gressive upgrading of Poland’s exportsand overall competitiveness.• In general, Poland’s markets havebecome highly contested and open tocompetition, reflecting trade liberalizationand growing market access by its prefe-rential trade partners.• The Polish economy needs to furtherdevelop its ability to absorb the shocks ofindustrial restructuring, building upon itslevel of infrastructure and human capital.• Active labour market policies appear tohave a mixed record in the creation ofnew employment opportunities, with trai-ning being clearly more effective thanvarious forms of subsidized jobs.• Trade integration with the EU is extensi-ve and advancing. However, productswith higher added value (machine andelectrical engineering goods) representless than one third of the exports of goodsin Poland’s trade with the EU.• The small and medium-sized enterprise(SME) sector is thriving, even though SMEsstill continue to face difficulties in acces-sing finance.

The Commission’s conclusion is thatPoland should be able to cope with com-petitive pressure and market forces withinthe Union in the near term provided itcontinues and completes its presentreform efforts.

CONSEQUENCES OF THEPOLISH EU MEMBERSHIP FORNORWEGIAN COMPANIES Polish accesssion to the EU implies full inte-gration of the country into the EuropeanUnion. While the extent of integrationalong certain dimensions is still not clear,e.g. free movement of labour betweenPoland and the EU, the following aspectswill have consequences for Norwegian

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companies operating or planning to ope-rate in the country. The most central impli-cations of the EU membership are freemovement of goods, freedom to provideservices, free movement of capital, har-monized company law, taxation andcompetition policy with the rest of the EU.Moreover such areas as intellectual pro-perty rights, environment, consumer pro-tection, customs and financial control areto be harmonized with the EU memberstates. Poland will also be able to join theEU monetary union.

Such changes would basically mean thatNorwegian companies operating inPoland would have the rest of EU as theirhome market. Meaning that there will notbe any barriers for e.g. selling goods, pro-viding services, moving capital betweenthe Norwegian companies` Polish subsidi-aries and the rest of the EU. Furthermorethe subsidiaries will face company law,taxation and competition policies harmo-nized with the other member states. Thecompanies will have to follow EU environ-mental and consumer protection regulati-ons and it will be subject to the joint EUcustoms and financial control. It is alsolikely that the operating currency will bethe euro. One area of great concern forNorwegian exports, with fish being a veryimportant part, is the expected changesin taxes on fish imported to Poland fromNorway. Currently there is no tax due tothe EFTA agreement, while the EU opera-tes with taxes at about 15 per cent, thiswill cause a large increase in fish priceson the Polish market.

FOREIGN DIRECT INVESTMENT(FDI) INFLOW TO POLANDIn 2000, Poland was the major recipient offoreign investment in Central and Eastern

Europe. According to information of thePolish Agency for Foreign Investment(PAIZ) the FDI inflow totalled in excess ofUSD 10.6 billion. The list of major foreign investors as at theend of 2000 included 885 companies from35 countries [PAIZ 2001]. The largest inves-tors came from France, the USA andGermany. The three countries togetheraccount for over 46 per cent of the totalamount invested in Poland since 1990.

So far FDI focused on manufacturing acti-vity. As at the end of 2000 this type ofactivity accounted for USD 19,5 billion ofthe invested capital, i.e. 42.5 per cent ofthe aggregate value of large FDI. Ascompared with previous years, a decrea-se was noted in the share of the investedforeign capital, mainly as a result of ahigh increase in the second in line invest-ment sector - financial brokerage, whichabsorbed USD 10.4 billion, accounting for22.7 per cent of the aggregate value of

large FDI. [PAIZ 2001]

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0

2

4

6

8

10

20001999199819971996199519941993

source: PAIZ (investment above 1 mn USD)

Foreign direct investments (bn USD)

Figure: Economy 1

1. France 7 901.0 70 2. USA 7 350.3 130 3. Germany 5 903.7 209 4. Netherlands 4 224.9 66 5. Italy 3 417.6 65 8. Sweden 2 027.8 53 14. Denmark 741.7 34 17. Norway 491.7 14

FOREIGN DIRECT INVESTMENTS BY COUNTRY OF ORIGIN (as of December 31, 2000)

(million USD)

Source: Paiz 2001

Equity & Loans Number of Companies

(Investments over 1 million USD)

Figure: Economy 3

Others 42,5

Trade and repairs 8,7

Transport, storage and communications 12,2

Financial brokerage 22,7

Manufacturing 42,5

Distribution of FDI at the end of 2000

Spurce: Paiz 2001Figure: Economy 2

(%)

THE MAIN SECTORS OF POLISHECONOMY

The main sectors in the Polish economyare industry, construction, agriculture,trade, transport services and tourism.

Since 1992 Poland has been recording anupward trend in industrial production,which seems to be gaining momentumafter a temporary fall at the beginning ofthe transformation period. The volume ofindustrial production sold rose in the years1992- 2000 at an average annual rate of7.3 per cent, and in 2000 alone it increa-sed by 6.8 per cent. The high growth rateof Polish manufacturing industry is basedon increased activity of private sectorfirms.

In 2000 the total value of sales of buildingand assembly production, includinginvestment modernisation and renovati-on- maintenance works, amounted toUSD 10.9 billion, down 2 per cent from theprevious year. Employment was alsodown by 10.6 per cent, from 602 000 in1999 to 538 000 in 2000. [PAIZ, 2001]

Poland is an agricultural producer ofworld importance. In 1999 Poland occupi-ed first place in world production of ryeand fourth in potatoes and oats. The culti-vated surface in Poland accounts for 50.1per cent of the total surface of the coun-try. Nearly all previously stat- owned farmshave been privatised since the processbegan in 1990.

The process of economic transformationin Poland has brought about fast and per-manent effects in the functioning of thedomestic trade market. Between 1990and 2000, the number of shops more thandoubled.

GDPAfter the big change in 1989/90 threeyears were needed for consolidationbefore rapid growth started. In the periodfrom 1994 to 2000 the GDP increasedrapidly to 1997, but has now sloweddown, maybe because of the uncertaintyin the world economy. The increase inGDP is still growing, but not as much asthe government desired. Expected incre-ase in GDP in 2002 is 1.4 per cent. [NOBE,2001

FOREIGN TRADEOwnership transformations and privatesector growth in the Polish economy haveresulted in an increase in the private sec-tor share in foreign trade turnover. Inexports this share rose from 4.9 per cent in1990 to 83.6 per cent in 2000 and inimports, it rose from 14.4 per cent to 84.2per cent, respectively.[PAIZ, 2001]

In spite of the high growth rate of turn-over in Polish foreign trade, the share ofPoland in world exports is still far fromsatisfactory (0.5 per cent in 1999). Thevalue of Polish foreign trade turnover percapita grew stedily from USD 858 in 1993,to USD 1 897in 1999. These figures must beconsidered too low in relation to Poland’seconomic potential.[PAIZ, 2001]

In exports and imports Poland’s maintrade partners in 2000 were Germany fol-lowed by Italy, France and theNetherlands. The main commodity groupsin Polish exports and imports in 2000 inclu-ded machines, equipment and means oftransport, followed by industrial goods.

Poland’s central location in Europemeans that transport, especially landtransport, plays an important role asPoland is crossed by a lot of importanttransport routes from Western Europe tothe east, particularly to Russia, Belarusand Ukraine. Transport services create

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Figure: Economy 4

jobs and are a source of considerablebenefits. Employment in the sector oftransport, storage and communication atthe end of 1998 totalled 621 000. Theshare of gross added value recorded inthis sector accounts for 5.7 per cent ofthe GDP.

Poland is becoming an increasinglyattractive country for tourists. The growthin the number of tourists coming toPoland testifies to the effectiveness of itstourist attractions. Between 1990 and 1998there has been an almost fivefold growthof the number of tourists visiting Poland.

IMPROVEMENTS IN THECOMPETITIVENESS OF EXPORTSPoland has since 1991 had a negativetrade balance, typically because Polandexports raw materials and imports theprocessed goods instead of doing theprocessing themselves. There is a largerestructuration going on in Poland regar-ding this problem, and the reformation ofPolish industry is already bringing evidenteffects. Steady more goods manufactu-red in Poland satisfy international stan-dards, which improves their competiti-veness on foreign markets as well as onthe domestic market in relation to impor-ted goods.

LABOUR MARKET(FOR MORE DETAILS, SEE THE HUMANCAPITAL SECTION ON PAGE 50)The Polish workforce is the largest inCentral and Eastern European countries(CEE) with approximately 15 million peo-ple. The labour force is also among theyoungest in Europe and the average ageis steadily getting younger. Over the nextfive years net growth of the workforce isexpected to reach one million. At thesame time restructuring of certain branc-hes of industry and government adminis-tration has and will lead to rationalizationof employment. The labour cost is current-ly the most expensive in CEE countries.One of the reasons is the appreciatedZloty.

The lower economic growth rate, groupdismissals in privatized enterprises as aresult of employers’ commitments regar-ding employment guarantees, and cont-inuation of the restructuring process, have

all led to a deterioration in the situationon the labour market.

UNEMPLOYMENTUnemployment was no issue in Polandbefore 1990, but the tough principles ofthe market economy soon began affec-ting the labour market. During 1990,unemployment reached 6.3 per cent ofthe labour force. It stabilized in 1994 at alevel of 16 per cent and from then onstarted to increase. The unemploymentrate is currently over 18 per cent [GUS]and is expected to remain at this levelnext year.Unemployment benefit lasts only sixmonths and the long-term unemploymentrate is increasing. There is a substantial dif-ference between unemployment in ruraland urban areas. Warsaw has an unem-ployment rate close to the natural rate ofunemployment (about 4.5 per cent) whe-reas in other areas 25 per cent is notuncommon.

MISMATCH PROBLEMMany have acquired good professionalqualifications but cannot find workbecause the vocational educational sys-tem has not kept up with the changes indemand for specific professional skills. Asubstantial amount of the unemployedforce does not have the possibility ofmoving because they simply cannotafford it.

WAGES AND SALARIESThe level of average gross monthly pay isdiversified depending on the type of busi-ness conducted by economic entities. In2001, average gross monthly salary in

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16

5

10

15

20

009896949290

Unemployment

Source: GUS

Figure:Economy 6

%

Poland amounted to about PLN 2 150[GUS]. On average the pay is better inpublic jobs than in the private sector.Social costs for varies aroun 36 per centof gross wage. This is considerably higherthan many other European countries. Thepay level in executive positions has incre-ased up to European standard in somesectors. According to the estimate of theMarket Economy Research Institute, thecost of labour calculated per hour inPoland remains several times lower thanin the European Union countries.

CONSUMER PRICE INDEX ANDHOUSEHOLD INCOMEThe table below illustrates the ConsumerPrice Index (CPI) and monthly real grosswages development in Poland develop-ment in Poland over the recent years.As one can observe from the indicatorsabove, inflation has been outpacinggrowth in wages in the recent years.Moreover the inflation rate has beengoing down in the period from 1995 to1999 but has increased again in 2000.

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REFERENCES

[GUS]Central Statistical Office of Poland2001

"How to do business in Poland 2000",United Nations IndustrialDevelopment Organization inWarsaw, August 2000

Polish Agency for Foreign Investments(Paiz), [Online],URL: <www.mg.pl/english>

European Commission ReportNovember 2000, [Online],URL:<http://europa.eu.int/comm/enlargement/index.htm>

Foreign Trade Research Institute:“Poland - Your Business Partner”, 2001

[NOBE, 2001]Independent Center for EconomicStudies [online],URL<http://www.nobe.pl/fore-cast1001.htm[Cited 30. January 2002]

Ministry of Economy [online], URL<http://www.mg.gov.pl/english/daip_enu/inv_strat/index.htmhttp://www.mg.gov.pl/english/daip_enu/hz2k/hz2k_enu/t-6a.htm[Cited 30. January 2002]

A BRIEF HISTORY OF POLANDPoland, a country with a proud past filledwith wars and conflicts. Once a greatnation, but devastated by its neighboursagain and again. Poland, God’s play-ground situated in the heart of Europe.

The name Poland originates from thePolanie tribe (“people of the fields”)which settled here in the 10th century. In966, Poland’s king Mieszko I was baptized,and this year mark the birth of the Polishstate. However, it was not until the 14thcentury, and the rule of Casimir the Greatthat Poland really developed towards amighty force. Before that there were

several internal conflicts and invasionsfrom outside; the Mongols ravaged thecountry several times and the powerfulTeutonic Knights occupied the north pre-venting Poland’s access to the Baltic Sea.

In the 15th century a union with Lithuaniawas established that lasted 400 years. The16th century will forever be known as thegolden age for Poles. This was a time vir-tually without war, and massive exportsmade Poland one of the great powers ofEurope. Culture and science flourished,and the Polish people experienced goodtimes.

However, problems started to build up.The Polish nobility’s power grew, eventual-

ly leading Poland in to a sort of republic:the gentry elected the king and the Sejmacted as a Congress. The Sejm actuallyhad liberum veto, meaning that theopposition of only one member made itimpossible to change the law. Enemiessurrounded Poland and soon the Sejmbecame an instrument of foreign powerplay, choosing hopeless kings and ruiningthe country. Poland had wars withSweden, Russia, Turkey, the Tartars andthe Cossacks. These attacks were all con-quered, but what remained was a totallyravaged country. In the 18th century,Russia gained control over a weakenedPoland. In fear of lacking strength to con-trol the whole kingdom alone, agree-ments with Austria-Hungary and Prussiawere made to partition the country. Thiswas done three times between 1772 and1795, erasing Poland from the world map.

MODERN TIMESDespite this, the Polish state lived onthrough the dreams of a free Poland inthe minds of millions of people. Attemptsto gain independence were launchedduring the 19th century, but it was impos-sible to beat three powers at a time. Latercame World War I, in which the three par-titioning countries found themselves asenemies, and eventually lost the war. TheGreat Powers who won the war saw astrong Poland as something favourable tothe power balance in central Europe.Consequently, Poland was given a chan-ce to be reborn. As most of the battlesduring the war were fought on Polish terri-tory, the country was again left in ruins.The inter-war years were filled with chaos,difficulties uniting the three parts and aterrible economy. At the same time, neit-her the Soviet Union nor Germany accep-ted the borders stated in the Versailles tre-aty.

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840-900Several West Slavic tribesunited under the Polanie-a tribe that gives rise to first ruling dynasty, the Piast 1138-1295

Fragametation intomany duchies

1619-1772Series of disastrous warswith Cossacks, Russians,and Swedes.

1815Congress of Vienna createsCongress Poland under Russian crown

966Poles begin conversionto Christianity

1338Polish duchies reunitedby Casimir the Great

1830-31Polish revolt crushed by Russian troops, area merged into Russian empire

1919-21Russo-Polish War, eastern boundary established byTreat of Riga

19001400800

1772-95Three partitions erasePoland from the map of Europe

Poland’s independence did not last long,during World War II the country was parti-tioned once again. This time betweenGermany and the Soviet Union, two cruelregimes which destroyed the countrybeyond belief. Of all countries affectedby the war, Poland came out as the mostdamaged. 6.5 million Poles died-, and thewhole country was in ruins, much worsethan ever before.

After the war, Poland hoped to regain itsindependence. Again the Great Powersplayed with Poland’s destiny, and alt-hough Poland all the time fought for theallies, the country was left under Sovietcontrol after the Yalta conference. Inaddition, the borders were moved west-wards, creating a Poland quite differentfrom what it used to be. This led to mass-scale emigration of both Poles andGermans. The Soviet Union ruled Polandhard, but the Polish people were hard tocontrol. The Catholic Church played anenormous role in this battle, uniting thepeople and holding the moral up. A seriesof strikes was arranged through theseyears, and when Cardinal Karol Wojtylawas elevated to the papacy in 1978, awhole country found new hope. The1980's were filled with numerous strikes.The communists were losing control andthe regime was loosening up. The workerswere allowed to form trade unions, andseveral million Poles joined Solidarityunder the lead of Lech Walesa. Solidaritywas allied with the church, and togetherthey formed a frontier against commu-nism. The leaders in Moscow were notsatisfied with the developments in Poland,and expressed clear signals of this.Pressure from the Soviet Union led to adeclaration of martial law in 1981. Polishleaders tried to seize control to avoidSoviet action. Solidarity was forbidden

and the regime used force to suppressthe population. In 1983, Walesa receivedthe Nobel Peace Prize for his work for ademocratic Poland. As Gorbachev beca-me General Secretary of the CommunistParty in Soviet, he drastically changed itsforeign policy. The Soviet Union loosenedits grip on Poland, and the foundation forcommunist control was gone. The pressu-re for Solidarity continued, and in 1989,Poland became the first country in theSoviet bloc to break out of communismrule.

Walesa later became Poland’s president,but lost the election in 95 to the formercommunist Alexander Kwasniewski, who isstill in office. During the last decade anew Poland has been built, a very youngcountry in a modern and independentsense of thinking. Considerable privatizati-on, restoring of the economy, joiningNATO and seeking EU membership areissues of great importance.

RELIGION IN POLAND

Strolling around in a typical Polish city,one of the first things that strike you is allthe churches. Poland is one of the strong-est catholic bastions in Europe, with 95per cent confessing to Pope John Paul II.An even more impressive number comesfrom the fact that about 70 per cent goto church every Sunday. These numbersshow that the country is very homogene-ous, and there are few significant minoriti-es. The church is a powerful force, politi-cal, social and cultural. It influences dailylife and society as a whole. Poland is forexample one of only two countries inEurope to have a law forbidding abortion.

19

1939Hitler and Stalin agree todivide Poland, German invasionlaunches WWII

1945Soviet liberation, Yalta and Potsdam Conferencesestablish new Polishboundaries

1955Warsaw Pactfounded

1970Workers revolt in Balticports, government leadership under Gomulkaforced to resign

1947Communist-dominatedgovernment in place

1968Soviet led Warsaw Pactinvasion of Czechoslovakiaincludes Polish forces

1978Polish archbishop electedPope John Paul II

1989Communist Partydomination ends followingpartially free elections

1981-83Country placed under martial law, Solidaritydissolved, limited market-oriented reforms implemented

1980Solidarity founded in Gdansk, strikes forcegovernment to acceptworker demamds

199019601940

So why is the Catholicism so strong inPoland? Poland has traditionally been astrong Catholic country, ever sinceMieszko I swore allegiance to the Pope in966. During the Middle Ages and later, thechurch under the Pope was generallyvery strong in the whole of Europe. But

when the church lost its power in most ofEurope, it kept its strength in Polandthroughout the 20th century. The explana-tion is very important for understandingthe Polish people; since the middle of the18th century, Poland has been domina-ted by foreign powers. During this period,the church has served as a shelter forPoles. Here they have spoken freely, andthrough the church Polish traditions and aPolish state have lived on. Many peopleeven believe that Poland would not haveexisted today without the support of thechurch. Especially during communism, theCatholic Church played an immense role.It supported worker’s rights and the fightfor independence. When Solidarity nego-tiated with the communism regime, thechurch participated and exercised pres-sure. It was only through the speeches bymembers of the Catholic hierarchy thatPolish society was able to communicatetheir opinions to the elite of communistrule. A very important event was whenArchbishop of Krakow, Karol Wojtyla waschosen to be the world’s next pope. This

made generations of Poles see the end ofcommunism, and they united as neverbefore. John Paul II was a sworn anti-Communist, and he made three officialvisits to his native country before theSoviet Union fell. These were of great

importance, and today the Pope is wit-hout doubt the most respected personamong Poles.

To show how strong the church really is,and how it influences daily life, one canfollow the ongoing EU-discussions inPoland. At the end of 2001, the CatholicChurch declared that it supported Polish

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Facts About the Country

Area:312 700 sq km (120 778 sq miles) (For instance seven times larger thanDenmark)

Large cities: Warsaw (capital), Lódz,Krakow, Wroclaw, Poznan, Gdanskand Szczecin

Land boundaries:Poland’s borders have often chang-ed through the history. TodayPoland’s neighbours are: Germany,the Czech republic, Slovakia, Ukraine,Belarus, Lithuania, Kaliningrad (Russia)

Rivers: Vistula, Warta, Odra

Landscape: North: Sandy beaches(Total coastline: 528 m). Farther south;two large sea areas named: (DePommerske and De Mazuriske). In thecentral part: Woodland and fieldswith agriculture. The mountain rangealong the southern border is named:(Sudetene and Karpatene)

Highest point:Rysy (2.499 meters overthe sea)Flag: Two equal horizontal bands ofwhite (top) and red

membership. Especially among people inthe villages, this will greatly influence theirchoice. They are often less educated andless informed about the consequences forPoland following possible membership.This could lead them to vote no in a refe-rendum. But with the church’s power inrural areas, this will surely lead many tovote yes, and thereby securing thatPoland accepts EU-membership.

PEOPLEPOPULATIONThe population in Poland is about 39 milli-on, and in the last few years has beenexperiencing very slow growth (approx.0.36 per cent). Half the population lives inlarge cities with over 100 000 inhabitants.

38 per cent of the total population live inthe countryside. The population density is124 people per sq. km. In recent years theworking population has been experien-cing a dynamic growth as a result of thedemographic trends. In 2001 there were15 million people employed, andPoland’s workforce is among the young-est in Europe [GUS]. Poland is one of the most homogeneouscountries in Europe. Before the SecondWorld War there were many Jews,Ukrainians and Germans in Poland. Buttoday over 98 per cent of the populationis of Polish ethnic origin. Today the popu-lation of Polish communities abroad is esti-mated as about 12 million (5.6 million livein USA, mainly in Chicago).

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Famous Polish Personalities

•Chopin, Frederic (1810-1849)World-famous pianist and composer.Born in Zelazowa Wola near Warsaw,but settled down in Paris in 1931. Hiswork reflects the Polish national spirit.

•Curie, Maria Sklodowska (1867-1934)Best known for her pioneering work inthe study of radioactivity which ledto the discovery of the elementsradium and polonium. She receivedthe Nobel Prize twice (1903 and1911).

•Copernicus, Nicolaus (1473-1543)Scientist; astronomer. Famous becau-se of his heliocentric theory. He pro-ved that the earth rotated aroundthe sun.

•Matejko, Jan (1838-1893)The greatest Polish painter, who pain-ted large pictures of scenes fromPoland’s past. (He used his pencil asa weapon in the struggle for freedomand independence).

•Mickiewicz, Adam (1798-1855)Poland’s greatest poet. Much of hiswork was written in exile in Russia,including his great national epic,”Pan Tadeusz” (1834).

*Polanski, Roman (b.1933)Filmmaker. Known for among others”Rosemary’s baby” and”Chinatown”.

•Sienkiewicz, Henryk (1846-1916)His novel ”Quo Vadis?” (1896)Became internationally famous. Hewon the Nobel Prize in literature in1905.

•Walesa, Lech (b.1943)Electrical worker in Gdansk. The mainperson in the forming of independenttrade unions and national confede-ration of trade unions calledSolidarity. He became President, andreceived the Nobel Peace Prize forpeace in 1983.

•Wojtyla, Karol (b.1920)Pope. Born in Wadowice nearKrakow. In 1978 he became PopeJohannes Paul II

LANGUAGEPolish is the official language. Polish isknown for being complicated and hardto learn. English is possibly the most popu-lar and widely spoken foreign languagein Poland. Small groups also speakGerman, Lithuanian, Belarussian, Ukrainianand Slovakian.

EDUCATIONEducation is compulsory for all childrenfrom 7 to 15 years of age. The literacy-rate in Poland is 99 per cent. There aregeneral, technical and vocational secon-dary schools. There are also colleges ofeconomics, engineering and agriculture.All the major cities have a university, andthe oldest university in Poland is situated

BUSINESS CULTURECONDUCTIt is difficult to communicate in Englishoutside the main cities where few of thecitizens speak this language.Nevertheless, within the main cities youcan expect people to know English. Mostyounger and educated people speakEnglish. Once a business contact is esta-blished you can expect hospitality. Polesare on the whole friendly and hospitable.

Business in Poland is based on personalrelationships. It is recommendable tohave a local person to represent you inthe beginning. That agent does not haveto be Polish - as long as he / she knowsthe Polish business practice and how todeal with the Polish culture.

In general, conducting business in Polandis done in a more formal approach thanone is used to in Norway. Titles and agemean a lot for Poles. It is appropriate touse Mr or Ms when addressing the coun-terpart. Never use “you”. Managers ofcompanies in Poland have a strong andrespected position and it is customary tobow your head when shaking hands.Furthermore, written confirmation concer-ning contracts and other agreements isessential. Another aspect is the follow-upof the agreement. Poles are used to closeand frequent contact with their foreignpartners. One good way to do this is tohave a representative on the board ofdirectors. Moreover it is important to bearin mind that doing business requires time,often more time than expected. You

should not get too nosy and instructivewhen it comes to matters that Poles feelthey know best.

Business cards are commonly written ontwo sides, one in Polish and the other inEnglish. This is the item that people proba-bly keep the longest time after you leave.It is usual to use the English side for con-tact information and the Polish side fordescriptive information.

GIFTS AND CORRUPTIONCorruption in the public sector is relativelywidespread and considered a high priori-ty issue. In the private sector corruptiondepends on the type of industry, howeverit generally increases in accordance tothe privatization of the industry. This,among other factors, makes networksand social relationships important. It isessential to be polite and get to know thenetwork of your business partner; this willmake business be more efficient.

BUREAUCRACYSeveral people International Business metin Poland said that the bureaucracy isquite tough. Local authorities have esta-blished very strict control mechanisms,which by far outclass the respectiveNordic ones. Due to Polish legislationpractically all documents have to be inPolish. In general, there are many detailsto be followed, which emphasizes theneed for a local representative.

FOOD AND DRINKTo eat out in restaurants is no longer asunusual as it was under communism.Traditional Polish food is continuouslybeing combined with and influenced byforeign food. The custom of tipping is thesame as in Norway. Vodka is the nationaldrink and Poles have often been catego-rized as heavy drinkers. It is unacceptableto drink during working hours.

CRIMINALITYThere are large differences between theupper and lower classes. The welfare sys-tem in Poland is different from theNorwegian one. Social security is paid outonly for a half of the year after being laidoff. With the high unemployment rates,about 18 per cent on a national basis, it iseasy to turn to criminality [GUS].Nevertheless you can feel safe within thelarge cities where you can see guardseverywhere you turn. The country is

Society and culture

22

almost in the centre of Europe and is visi-ted by criminals from the east. Street cri-minality in Warsaw has dramatically incre-ased the past years. Still Poland is muchsafer than many other Central andEastern European countries.

International Business

23

REFERENCES

[GUS]Central statistical Office of Poland

Wiechowski, MJ. (ed.), Basic factsabout Poland -statistics, geography,economy, people, culture and histo-ry-, [Online],URL:<http://www.3w3.net/polska/Info/pl-facts.html >1998

Mieczyslaw Kasprzyk, [Online], URL:<http://www.kasprzyk.demon.co.uk/www/HistoryPolska.html>[Cited January 2001]

CountryReports.org, [Online], URL:<http://www.countryreports.org/history//polahist.htm>[Cited January 2001]

Polonia Today, [Online],URL:<http://www.poloniatoday.com/historyix.htm > [Cited January 2001]

The Warsaw Voice, [Online], URL:<http://www.warsawvoice.pl/v632/PV07.html>[Cited January 2001]

New Advent, [Online], URL:<http://www.newadvent.org/cat-hen/12181a.htm>[Cited January 2001]

Gotfredsen, Inger Brinkbæk, Polen,Geografi og samfund, Munksgaard1996Tilbury, Jesper and Pawel Turnau,Poland, Blue guide, A&C Black 2000

Nicklasson, Gunnar and JoannaNicklasson, Polen, resa i tid och rum,Bokförlaget Spektra BA 1991

Nedergård, Erling, Turen går til Polen,Politikens forlag 1993

"How to do business in Poland 2000",United Nations IndustrialDevelopment Organization inWarsaw, August 2000

Foreign Trade Research Institute:“Poland - Your Business Partner”, 2001

Meetings and correspondence withJon Hanssen, the Norwegian TradeCouncil; Raimo Valo, Handelsbanken;Erik Welle Watne, SND; Igor Jelinskiand Witold Smaga.

The early 1990s saw the initiation of theprocess of an overall restructuring ofPolish industry, including the mining andquarrying industry, significant elements ofmanufacturing, as well as electricity, gasand water supply. These structural trans-formations were made to adjust industryto competition in a market economyand, in particular, to face the challengesthat result from the opening of the Polish

economy and Poland’s integration intoEurope.

To restructure, enterprises are now intro-ducing new organizational structures andmethods of management, replacingmachines, introducing new technologiesand revamping the product mix.Combined with the introduction of effici-ent procurement methods (for instance,"just-in-time") and ISO standards, Polishcompanies expect the industrial restructu-ring to result in growth of labour producti-vity and improved profitability.

Generally, investments in technology arelooked upon as a comparative advanta-ge as skilled labour now is among themost expensive in CEE countries.Technology in many sectors is thereforehighly developed and still improving. Theforeign factories in Poland have the hig-hest productivity since they have of thebest machinery, technology and locati-ons.

INDUSTRYHEAVY INDUSTRYThe steel industry has in particular traditio-nally been regarded as one of Poland'smain strengths, as the Soviet Union was

dedicated to establish Poland as a steel-producing province in the post-war com-munist era. Till this day, much of the oldpost-war machinery is still used in produc-tion - as the investments required to buynew equipment are formidable, manyplants have remained almost as theywere in the 1960s. However, with the costof labour gradually increasing, compani-es have realized it is in their best interestto purchase new machinery to increaseefficiency, work security, as well as to beable to meet international standards. Inaddition to this, pollution and waste poli-cy requirements defined by the EU havemade new investments necessary to stayin business. As a result of this, the structuralchanges and modernization carried outin the industry over the past several yearshave resulted in reduced productioncosts and improved competitiveness onthe international market.

In general, the Polish domestic industrialsuppliers are able, for the most part, toprovide the local industries with parts andlow-tech electronics and machinery.High-tech electronics and complicatedsystems, both for use in the productionand as part of an order, have to beimported from outside of Poland. In gene-ral, the Polish heavy industry is skilled anddelivers good quality products at a reaso-nable price..

Several international companies producecars in Poland. Here Fiat and GeneralMotors are the most important. These fac-tories make an extensive contribution totechnology transfer by bringing state-of-the art machinery into the country.

CONSTRUCTIONPoland is a significant exporter of buildingservices. It is essential to adjust the Polishbuilding industry to European standards,which vary between individual EU mem-ber states. Poland cooperates closely inthis field with the European Committee forStandardisation. Construction design stan-dards (Euro codes) constitute a specialgroup of European standards in the buil-ding industry. The Euro codes concerningthe designing of construction from conc-rete and steel have already been introdu-ced in Poland. Other standards are in pre-paration.

The Building Law, which took effect in1995, extensively amends previous provisi-

Technology

24

ons. Erected buildings must satisfy techni-cal requirements ensuring security andreliability of construction, environmentalhygiene and related requirements con-cerning building materials, protectionagainst noise and convenience of use,rational energy consumption, durability ofbuildings and their components, and firesafety.

AGRICULTUREAgricultural production is relativelymechanized. In 1999, there was one trac-tor per 14 ha of land under cultivation.The consumption of fertilizers in terms ofthe pure component in the economicyear 1998/1999 amounted to 87.4 kg perhectare of land under cultivation, 2.2 kglower than in the previous year.

FOOD PRODUCTION

It is a key factor in this industry to haveamong the best and most efficient equip-ment park possible. Many companieswant to export to the European marketbut stringent demands have to be fulfil-led. If Poland becomes an EU memberstate the same demands will exist evenon the domestic market. Most productionequipment is Polish because imports areusually expensive.

BANKING AND FINANCE

The technology in the banking and finan-ce sector is well developed. There arecurrently three payment systems compa-red to one in Norway (BBS). Telephoneand Internet banking services are com-mon. Debit and credit cards are widelyused and ATMs are easy to find as well asshop terminals. Polcard is the mostadvanced domestic system and cheaperthan international cards.

On the Warsaw Stock Exchange, theWARSET system has been in use since 2001(provides full automation of order transferand transaction execution). The WARSET issimilar to the systems used in the stockexchanges in Paris, Chicago andSingapore.

TELECOMMUNICATIONS

The Polish telecommunication sector is akey industry and an important part of the

infrastructure. The telephone network hasan annual increase of 15 per cent andhas been ranked among the fastest gro-wing markets in Europe. The Polish infra-structure is far behind other Europeancountries with about 20 telephones per100 inhabitants. To increase this USD 14 bil-lion will be invested the next 10 years.During few years the telephone connecti-ons and equipment have improved a lot,and all the regions in the country havenew cables and connections.

The national telephone operator,“Telekomunkacja Polska S.A.” (TPSA) willhave a monopoly till 2003. There are alsoa variety of local operators and GSM net-works throughout the country. There areno coin telephones in Poland, so it isnecessary to buy telephone cards inorder to use public phones. Foreign com-panies have the possibility for investmentsin local telephone services and additionalservices.

GSMSince the middle of the nineties there hasbeen an increase in mobile telephones.Cellular telephony first appeared inPoland in 1991 with operations of PTKCentertel Company, which now has amarket in almost every area in Poland.There are about 7 450 000 mobile users inPoland, thus setting the average mobiletelephone density to about 19.3 (theEuropean average is approx. 40).

SOFTWAREIn the last few years more than 3000 com-puter companies have been established,but the market is not saturated. The bankadministration and the telecommunicati-on sectors are the largest purchasers ofPCs and software, but there are also risingPC-sales to the domestic market.

INTERNETThe Internet is becoming increasinglypopular as a source of information and acommunications medium. At the end of2000, the number of Internet hosts wasestimated at roughly 76 per 10 000 resi-dents. Internet cafés are easily accessiblein most cities.

25

MEDIATELEVISION

There are three national television stationsin Poland. Two of them are owned andoperated by the state-owned companyTVP - Polish Television. The third station isPolsat, the first private television station inPoland with national coverage. The state-owned channel Polonia is broadcastedby satellite and directed to viewers livingoutside Poland. All stations with non-satel-lite transmission must have a licence from

the National Radio and Television Council.Roughly estimated, Poland is the countryin Europe with most satellite dishes relativeto the number of people apart fromFrance and Great Britain.

Video systems: PAL is currently the VHSstandard (SECAM until recently). VHS isthe most widely used format for recordingfrom TV for home and video rentals.

RADIORadio is growing in popularity as anadvertising medium. There are numerousradio stations in Poland, six stations areavailable nationwide of which three arecontrolled by the state-owned PolskieRadio. The remaining stations operateregionally or locally. According to a sur-vey carried out by OBOP, 90 per cent ofPoles regularly listen to the radio and 75per cent listen every day.

NEWSPAPERSAbout 6 million Poles read newspapers ona regular basis. 22.5 per cent of urbanresidents and 14 per cent of the ruralpopulation read newspapers. Men readmore frequently than women (31 per centcompared to 26 per cent), and theyspend slightly more time reading newspa-pers (40 minutes a day).

ELECTRICITY

Poland generates 97 per cent of its elec-tricity in thermal plants. 60 per cent of thisis from hard coal and 37 per cent fromlignite. Only 3 per cent of all electricity isgenerated in hydro power plants. Polandhas a high level of energy self-sufficiency,90 per cent. This is higher than in most EUcountries.

Electricity is 220 V, 50 Hz. The plugs usedare the same as in the rest of ContinentalEurope - round with two pins.

Technology

26

REFERENCES

"How to do business in Poland 2000",United Nations IndustrialDevelopment Organization inWarsaw, August 2000

The Gdansk Institute for MarketEconomics, “Banks and BusinessEnvironment Institutions in Poland”

Warsaw Stock Exchange [Online]

URL:<http.www.wse.com.pl> [Cited24 February 2002]

PAIZ 2001, reports: ”The PolishConsumer market” and ”TheTelecommunications Sector inPoland”[www.paiz.com.pl]

Droth, Grimm, Haase, “Polen aktuell”,Leipzig: Institut für Länderkunde, 2000

27

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Part 2•Setting up Business•The Legal Framework•Banking and Finance•Support Facilities•Human Capital•Transportation Infrastructure

In 2000, Poland was again the major reci-pient of foreign investment in Central andEastern Europe. According to initial esti-mates of the Polish Agency for ForeignInvestment (PAIZ), the foregin directinvestment (FDI) inflow totalled in excessof USD 10.6 billion.

WHY INVEST IN POLAND?

• A qualified workforce• Relatively low cost of labour• Attractive conditions for the operationsof foreign investors• Poland's forthcoming entry to theEuropean Union• Relatively good economic performan-ce and favourable prospects for furthergrowth• Large market of nearly 40 million consu-mers

Foreign investors in Poland have shownparticular interest in the manufacturingindustry, especially food-processing andautomotive industry.

OUTLINE OF THE PROCESS OFSETTING UP A COMPANYThe establishment of a company by aforeign entity does not require any admi-nistrative permits, except for setting up abank, for which a permit must be obtai-ned from the Banking SupervisionCommission.

BUSINESS LAWAccording to the principle of mutuality,foreign investors in Poland can operatewithin the territory of Poland in all formsprovided for by Polish law. This applies toforeign entities registered in the EuropeanUnion or OECD member states, or countri-es with which Poland has signed agree-ments on mutual support and protectionof investments. For entities from othercountries, the Economic Activity Law pro-vides for three legal forms of operation:limited partnership, limited liability compa-ny and joint-stock company. Their opera-tion is regulated by the CommercialCompanies Law.

In general, domestic and foreign busines-ses enjoy the same rights. The only sphereof activity forbidden to foreign investors islotteries and gambling.

MARKET AND ADVERTISINGADVERTISINGTelevision, radio, press and exhibitionadvertising are now the most popularforms of promotion on the Polish market.The average (net) cost of a televisioncommercial ranges from PLN 500 to PLN100 000 for 30 seconds while the averageprice of an advertisement in the domesticpress ranges from PLN 300 to PLN 900 persquare centimetre of space.

Billboard advertising and "telegazette"advertising offered by different televisionstations of nation wide and regionalscope are also gaining importance. Thecost of placing a one-week advertise-ment on the first screen page of ChannelI and II of TVP ranges from PLN 250 to PLN650, depending on the sector. [FTRI 2001]

FAIRS AND EXHIBITIONSFair organizers are associated in the PolishCorporation of Organisers of Business Fairsand Exhibitions. The largest organizer offairs and exhibitions in Poland is thePoznan International Fair. The best-knownevents in Poznan include the investmentand technology fair held every June andthe Polagra agricultural and industrial fairheld each autumn. There is also a fairdevoted to furniture and other woodenarticles. The average cost per squaremetre of exhibition space in an unfurnis-hed hall at the Poznan International Fairin 1999 ranged from USD 75 to USD 95 and

Setting up Business

32

Figure:Business 1

outdoors from USD 25 to USD 50. Gainingpopularity as well are the LodzInternational Fair, Gdansk InternationalFair, East-West Border Fair in BialaPodlaska, Katowice International Fair anda number of fairs organized in Warsaw.(More information about the about 500fairs in 24 towns can be found in "Poland2001. International Fairs and Exhibitions",edited by Dima Advertising andPublishing Agency.)

SPECIAL ECONOMIC ZONES

The law on Special Economic Zones (SEZ)was passed by the Sejm on 20 October1994. It was amended in 2000 to reflect,among other things, arrangements con-cerning competition policy adopted inthe context of negotiations on Polishaccession to the European Union. The EUrequired in particular changes to Polishlaw regarding business subsidies to con-form to Community law.

Income from the economic activity in thezone generated by legal and natural per-sons may be exempt from corporateincome tax and personal income taxbased on rules in the corporate and per-sonal income tax regulations. The scale ofthe exemptions is specified in the ordinan-ces of the Council of Ministers establishingthe zones. The principles and scale of thepublic support granted to the entrepre-neurs under the law may not be changedto the detriment of entrepreneurs holdinga valid permit to operate in the zoneduring the period for which the zone wasestablished. The extent to which theexceptions apply depends, among otherthings, on the size of investment projectsundertaken and the number of peopleemployed.

If an economic entity is not entitled toexception from income tax, all its invest-ment expenditures connected directlywith economic activity conducted in thezone can be fully deducted from grossrevenue as costs in the fiscal year inwhich they were made. Such economicentities may also increase depreciationrates for fixed assets used to conducteconomic activity in the zone.

Special economic zones also offer facili-tation of construction law procedures by,for instance, faster and simpler issuance

of a building permit, transfer of a buildingpermit to another person, and so on.

The law on special economic zones alsostipulates that the Council of Ministersmay liquidate a zone before the periodfor which it was established has expired,and may also modify its area or mergezones. However, the law does not permitthat the total area falling within econo-mic zones can be increased by replacingan area with no hope of attracting invest-ment with another zone in a more attrac-tive area. Zones may not be liquidatedduring the period when permits for con-ducting economic activities in the zoneremain valid.

15 LOCATIONSThere are 15 special economic zones inoperation: Mielec, Katowice, Suwalki,Walbrzych, Lodz, Legnica, Starachowice,Kamienna Gora, Tarnobrzeg, Olsztyn,Slupsk, Kostrzyn-Slubice, Zarnowiec, Tczewand Krakow. By the end of 2000, 300 per-mits were granted for conducting econo-mic activity in special economic zones. Itis expected that the SEZs will be operatio-nal at least till 2017, i.e. to the expiry ofthe permits issued for conducting activiti-es in these areas.

TAX EXCEPTIONSNew investors will be able to enjoy prefe-rences in the form of income and realestate tax exceptions up to 50 per cent ofthe value of their investment projects.However, total tax allowances for inves-tors in particular zones will not be allowedto exceed the overall public support cei-ling in a given region.

PLANNED GOVERNMENT AMEND-MENTSThe special tax and legal regulations inthe SEZs have sparked some controversy,especially in view of the EU’s position, thatEU members should not introduce taxincentives for foreign investors or othergroups that would significantly deviatefrom the average level of taxation in agiven country. The EU countries plan toliquidate SEZs within 3 to 5 years. AlthoughPoland argues that it is not as well develo-ped as the EU, the activity of SEZs will belimited in Poland. The government plansto introduce some amendments to theLaw on Establishing SEZs. It is proposedthat instead of tax relief, investors will beoffered public assistance limited to a

33

maximum of 50 per cent of the invest-ment value. This assistance will alsodepend on unemployment and GDP percapita in the specific area and it will begiven in form of relief in income and pro-perty tax or through financing the infra-structure by the authorities. As a result ofthese amendments the size of publicassistance will be in line with EU standards.

The amended regulations will apply onlyto new investors obtaining their permitsafter new regulations are introduced. Theones who are already operating and whowill obtain their permits before thechange takes place will benefit from thecurrent, more advantageous tax exempti-ons. Therefore, potential investors consi-dering investments in SEZs should accele-rate their ventures, bearing in mind howe-ver, that after obtaining the permit opera-tions must begin within a specified periodof time.

In conclusion, it is important to note thatconducting business in SEZs in Poland canbe an advantage for investors.Nonetheless, as different conditions applyto different zones, a detailed knowledgeof the regulations regarding the particularzone and careful tax management isessential in order to obtain and benefitfrom the tax incentives. Furthermore, evenif the tax incentives will be reduced, SEZsin Poland will continue to attract foreigninvestors due to other forms of publicassistance.

INVESTMENT INCENTIVES

The government's incentive policy is lar-gely influencing investment decisions. Theact on public aid, which is now the fun-damental act regulating investment acti-vity in Poland, became effective inJanuary 2001. It controls conditions, pro-cedures, the amount and the form of theaid granted to investors. It also presentsnew opportunities for foreign investors bywarranting competitive advantage for acompany within the field of its activity.

The government’s main investment incen-tives can be listed as follows:

1. Special Economic Zones.

2. VAT taxpayers are entitled to adecrease in the amount of the tax

due by the amount of tax charged onthe purchase of goods and services.

3. Effectuation of a non-cash contribu-tion from outside Poland is exemptedfrom customs duty.

4. Polish customs law provides forseveral privileges for entrepreneurs(customs-duty exemptions, use of eco-nomic tariff procedures, conductingactivity in free customs areas etc.).

5. Possibility of returning the tax char-ged as an advance prior to the emer-gence of tax liability.

6. The corporate income tax (CIT)rates fell to 34 per cent - as of 1999; 28per cent - as of 2001; 22 per cent - asof 2004.

7. The number of depreciation rateswas reduced to 10.

8. Property tax - there is a possibility ofdecreasing the rate or completeexemption.

9. Motor vehicles tax - there is a possi-bility of decreasing the rate or com-plete exemption.

10. Grants for employment of theunemployed.

11. Grants dedicated for employmentof unemployed disabled.

12. Subsidies to interest rates of bankcredits for entrepreneurs for variouspurposes (farming, financing exportcontracts etc.).

13. Subsidies / credits forscientific/research work (coveringthings such as the purchase of com-puter software and development oflocal networks.).

14. Subsidies, credit guarantees, prefe-rence credits, subsidies to the interestrates of credits for entrepreneurslaunching innovative or new products,processes or technologies.

15. Bank credit guarantees for:

a. investment credits;

Setting up business

34

b. credits meant for purchase ofmaterials for production purposes

16. Reimbursing the cost of commu-ting and accommodation to personswho have undertaken employment orreceived training outside their place

of residence, in regions threatenedwith particularly high structural unem-ployment (up to 12 months maxi-mum).

International Business

35

BASIC LEGAL INFORMATIONSETTING UP FOREIGN ACTIVITIESEconomic activity may be started by fore-ign entrepreneurs and conducted (aftermeeting the relevant conditions) in alllegal forms available to the Polish citizens,i.e.:1. Natural person conducting economicactivity2. Civil partnership3. General partnership4. Partnership5. Limited company6. Mixed joint stock and limited company7. Limited liability company8. Joint stock company9. Division10. Representative office.

CORPORATE INCOME TAX (CIT)Taxpayers should note that all taxes arepayable monthly on account and thatinterest penalties in excess of 40 per centper annum apply to the late payment oftax.

All business entities and organizations arerequired to pay corporate income tax.Corporate income of legal entities istaxed at 28 per cent. The tax rate will bedecreased as follows: 2003 - 24 per cent;2004 – 22 per cent.

Losses can be carried forward up to fiveyears, though no more than 50 per centof the loss can be written off in any year.

PERSONAL INCOME TAX (PIT)An individual generally becomes a taxresident in Poland if he is domiciled inthe country. An individual has his usualdomicile in Poland when he is presentin the country for at least 183 days in acalendar year.

VAT – RATES AND REGULATIONSTax on goods and services (VAT) is abroad based tax levied on the sale ofgoods and services in Poland. An entity isrequired to register for VAT once its annualturnover on VAT able transactions exce-eds 10 000 EURO (39 800 PLN).

22 per cent: The base VAT rate is 22 per cent and ischarged on most goods and services.

7 per cent:A reduced VAT rate of 7 per cent is impo-sed on sales of:• Certain groceries• Goods used in health care• Goods used as children• Tourism and transportation services• Communal services (e.g. water distribution, street/square maintenance etc.)• Fertilizers• Gas• Energy• Newspaper, publications

3 per cent: E.g. sale of unprocessed agricultural pro-ducts

0 per cent:A zero VAT rate is levied on the export ofgoods and services and also on someinternational transportation services,financial and insurance services, culturalservices, agricultural machinery and fertili-zers, etc.

ACCOUNTING AND AUDITINGBusinesses operating in Poland arerequired to base their accounting proce-dures on a double-entry system. Eachcompany must also establish its book ofaccounts. There are no uniform require-ments for the book of accounts.

The Legal Framework

36

Figure:Legal 1

Nevertheless it has to reflect the compa-ny’s assets, the cost of production andthe profitability of the company. Theaccounting records, the annual balancesheet and the profit and loss accounthave to be maintained in Polish currencyand prepared in the Polish language.

Requirements regarding correctness andclarity of the accounting records do notdiffer from those applied in western coun-tries. All accounting records, documenta-tion, reports, etc. have to be kept for fiveyears.

SOCIAL SECURITY INSURANCE In Poland social security insurance consistsof the following kinds of insurance:Pension, disability, accident, and sicknessinsurance. (More information about this isin the section for Human Capital.)

DOUBLE TAXATION TREATIESPoland follows the model of OECD con-vention in negotiating its tax treaties. As ofMay 2001 Poland has signed agreementson avoiding double taxation with 78countries. These treaties are based on areciprocity principle, the may actuallyreduce or eliminate various taxes.

LOCAL TAXES AND CHARGES Local authorities are empowered to setthe level of rates and relieves in localtaxes. Their rates cannot exceed themaximum levels determined by theParliament.

Local taxes include:• Real estate tax• Transportation tax (imposed only on lor-ries and trucks)• Fair tax• Inheritance and donations tax• Agricultural tax• Forestry tax• Dog owner tax

REAL ESTATEAcquisition of real estate by foreignersmay take place solely on obtaining per-mission from the Ministry of the InternalAffairs. The Law does not apply to thetransfer of proprietary rights to heirs.

A foreigner intending to purchase realestate may apply for a permit issuancepromise. The promise is issued in the formof an administrative decision. It is valid for6 months from the date of its issue. During

the period of the promise’s validity, theMinistry may not refuse to issue a permit.All provisions applicable to a permit alsoapply to the promise.

The 2001 maximum real estate tax ratesfor selected types of real property are asspecified in the following table.

BANKRUPTCY AND INSOLVENCYBankruptcy of any business may bedeclared when a business entity has cea-sed to pay its debts. If the situation isshort-lived, due to temporary difficulties,the Bankruptcy Law does not give thegrounds to declare bankruptcy. The

Arrangements Proceedings Law aims toavoid the bankruptcy of economic entiti-es that are facing short-term liquidity pro-blems. Once a situation giving ground forbankruptcy arises, the entrepreneur hasto file a declaration of bankruptcy within2 weeks. Failure to do so is punishable. Acreditor of the company may also file abill for bankruptcy, as well as any of hiscreditors.

37

Figure: Legal 2

The legal framework

38

References

[FTRI 2001]Foreign Trade Research Institute (FTRI):“Poland - Your Business Partner 2001”

Bychawski, Grzegorz (ed.), How to dobusiness in Poland 2001, UNIDO ITPO Warszawa 2001[Online] URL:

<http://www.unido.pl>[Cited

February 2002]

Polish Agency for Foreign Investment,PAIZ, Research Department 2001URL: <http://www.paiz.pl>

39

40

THE POLISH BANKING SECTORThe transformation of the Polish bankingsector started in 1989, and has rapidlydeveloped since. As a result of the OECDmembership Poland agreed to let foreignbanks open branches in 1999. Before thisperiod foreign investors had to buy anexisting bank to get an operating license.

In an interview published in the Prawo iGospodarka [PG], Hanna Gronkiewicz-Waltz, Governor of the National Bank ofPoland, claims that the condition ofbanks has been generally improving.Banks are stronger thanks to accumulati-on of specific purpose reserves and ableto act as a cushion in case of unforeseenevents.

Foreign investors control 70-80 per cent ofthe Polish banking sector. At end of year2000, there were 73 commercial and 680very small cooperative banks operating inPoland. The concentration is high as thetop five banks hold about 50 per cent ofthe total assets of the banking sector.Around 60 banks are more or less domina-ted by foreign ownership (About 50 percent of the total assets of the bankingsector)[GIME].

Because of the high domination by fore-ign banks, it is fair to say that the bankingsector in general is in good shape and willbe well prepared to assist companies forthe time when Poland will (probably)enter the EU. Nevertheless, there are seri-ous barriers to intensification or speedingup the privatisation process in Poland.These include: Capital shortage, worriedtrouble with Polish investors and the scar-city of funds available on the capital mar-ket.

Recently, in their search for new sourcesof funding, Polish banks have embarkedon setting up capital and insurancegroups. The diversification of banking ser-vices' offers by insurance facilities is alsoconvenient for banks' customers. Ownersof bank accounts can buy life and acci-dent insurance policies. The scope of the so-called investmentbanking, including brokerage services,capital market operations, preparation ofissues of shares and financial counselling,trusteeship, and asset management, hasbeen steadily increasing in banks' operati-ons.

Also, the market of Corporate Financeservices poses more and more seriouscompetition for traditional banking activi-ties: both holding deposits and grantingcredits. Most important of them include:handling of the issue of commercialpapers, handling of the issue of corporatebonds, management of customers' assets,intermediation in trading in securities atthe Warsaw Stock Exchange, handling ofissue of shares and counselling services inthe field of mergers and takeovers.Activities in the field of asset manage-ment and investment in securities beco-me substitutional to lending, while debtsecurities replace traditional credits. Theemergence of new financial institutions,such as investment funds or pension funds

Banking and FinanceNordic banks in Poland

There are four Nordic banks present inthe Polish market. All of them areoffering corporate services. In additi-on SEB and Nordea have retail servi-ces. Handelsbanken is the only bankthat has entered the market byGreenfield activity and not by anacquisition. Nordea aims to beamong the five largest retail banks inPoland.

Taking into consideration the assu-med initial target customer segments(subsidiaries of Nordic enterprises) forNordic banks in Poland, they shouldbe seen as emerging players compa-red to such banks as Deutsche Bank,Citibank, ING and ABN-AMRO. Thusthe Nordic banks are facing competi-tion not only from other Nordic com-petitors but also from banks which arenot usually met as competitors in theNordic region.

DANSKE BANK POLSKAwww.danskebank.com/pl

HANDELSBANKENwww.handelsbanken.se/pl

NORDEA www.nordea.pl

SEBwww.seb.pl www.bos.pl

41

will create growing demand for debtsecurities.

The network of small banking offices hasbeen developing at a relatively fast rate.Although the degree of saturation withbanks in Poland lags far behind theEuropean Union standards, positive trendsare noticeable in this respect. Centralizedinformation systems allow banks to opensmall offices with only few staff membersand to cut employment. Thererfore therise in number of bank-offices has notresulted in any increase in employment.The fall in the interest margin is expectedto slow down in 2002. Investment risk inthe banking sector is still the consequen-ce of growing competition betweenbanks in cutting the margins. The interestmargin is projected to fall to 3.2 per centin 2003 (compared to 5.4 per cent in1998).

POLISH BANK CHARACTERISTICSForeign companies who plan to invest orwho have already invested in Polandhave to be aware that there are somedifferences to the Western European mar-ket such as:

•Level of interest volatility•Level of currency volatility•Spreads between deposit and creditrates (Bank Guarantee Fond & CentralBanks rules for the Banks to deposit 5 percent of all deposits without interest rate inthe National Bank of Poland)•Tax on Civil Law Transactions (Former:Stamp duty on inter–company loans)•Foreign Exchange Law (Limitations oncross border transactions)•Thin Capitalization (Three to one)

It is recommended [DBP] that these diffe-rences be closely investigated before set-ting up account structures, financing(parent company loans contra local fun-ding) and hedging in general. The first great mergers occurred in 1997and were initiated by the takeover ofBank Gda_ski by BIG

THE POLISH CURRENCY (PLN) ANDINTEREST RATESThe Polish currency has been ratherbuoyant during the last year. There areseveral reasons for this strengthening:•Sentiment in the international financialmarkets has become less uncertain instep with the positive progression of the

US military actions in Afghanistan. Thisleads to greater risk acceptance, whichhas a (slightly) positive impact on emer-ging market currencies such as the PLN.•The budget situation in Poland has beenresolved. Among other things, it hasdemonstrated a strong resolve to imple-ment an unpopular, albeit necessary,tightening of fiscal policy.•Poland’s tighter stance on fiscal policyhas paved the way for a more lenientmonetary policy, reducing the tensionsbetween the government and theNational Bank of Poland (NBP).•Poland is increasingly perceived as a“blue chip” emerging market, and thePLN therefore has become less vulnerableto volatility compared to other emergingmarkets (e.g. Argentina or Turkey).

Despite the overall good performance ofthe PLN over the last year there havebeen periods where the PLN has beenweakened rather dramatically. This has

Figure: Bank 1

42

primarily been a result of political uncer-tainties and the overvaluation of the PLN.Given the overvaluation of PLN oneshould expect to see an adjustment ofthe exchange rates sooner or later.

The following factors are considered torepresent the greatest risks in respect ofthe positive trend:

• The Polish economy has experienced amarket slowdown, and there are no pro-spects of an immediate recovery. Thismay contribute to exacerbating thepublic finances, triggering a new budgetand currency crisis similar to the one wit-nessed during the past summer.• So far, the newly elected Polish govern-ment has performed surprisingly well.However, the coalition government bet-ween the SLD (ex Communists) and thePolish Peasant Party is definitely not a“dream government”, and we would the-

refore expect to gradually see govern-ment tensions emerge during the nextyears that could contribute to tarnishingits credibility in respect of the economicpolicies pursued.

If the global economic downturn continu-es well into 2002, the risk of internationalfinancial crises will increase, and this willhit relatively volatile currencies such asthe PLN.

FINANCE

Appropriate legal regulations are a signifi-cant element of the emerging capitalmarket. In 1991, the Sejm passed the lawon public trading in securities and on trustfunds. This way legal foundations formajor capital market institutions were laiddown. These institutions included: brokera-

ge houses, the stock exchange, trustfunds as well as the Securities Commissionas a government administration bodycontrolling and promoting the securitiesmarket.

WARSAW STOCK EXCHANGEThe Warsaw Stock Exchange (WSE) wasestablished by the State Treasury as anon-profit joint-stock company, and is theonly stock exchange in Poland. As of 1February 2002, there were 217 companies(market value of PLN 117 billion) andseveral bond series quoted on all marketson the WSE in total. Stocks are traded onthree different markets with differentdemands as follows (See Figure Bank 4):In addition to these three markets, inMarch 2000 the WSE introduced theSiTech segment, for innovative technolo-gies related to IT and telecommunicationstocks. Stocks traded on the main floorare the most liquid ones and representthe potentially lowest risk of the threemarkets. A permit from the Ministry of theInternal Affairs is required for purchase orreceipt by a foreigner of 50 per cent ofshares or stocks in a commercial compa-ny, or purchase or receipt of shares/stocksin a controlled company by a foreignernot being its shareholder.

In 2000, the foreign investors’ share in thestock trading on the WSE equalled 28 percent in contrast to only 2 per cent on thebond and futures market [UNIDO].

Bonds have been sold secondary on theWarsaw Stock Exchange since 1992. In

1998, the WSE also started trading futurescontracts on WIG20 index in the continu-ous trading system.At present, the retail sales network offersthe following types of bonds:-two-year fixed-rate bonds (DOS in Polishabbreviation)-three-year floating-rate bonds (TZ)

Banking and finance

2

3

4

5

20012000199919981997199619951994

Average annual currency rate (USD /PLN)

Figure: Bank 2

Figure Banking 3

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43

-four-year indexed bonds (COI) after theCPI

The provisions of the law on public tradingin securities, which has been effectivesince 4 January 1998, are compatible withOECD requirements and with legal acts ofthe European Union.

The WSE plays a minor role for mostNordic businesses, and we therefore referto references for further information.Several people we have met have criti-zed the stock exchange for not beingliquid enough. They recommend investorsto think thoroughly before entering theWSE at the current situation.

THE NATIONAL BANK OF POLANDThe National Bank of Poland (NBP) issuescurrency, holds Poland’s foreignexchange reserves, refinances and super-vises the banking system, exercises controlfunctions and issues licences for bankingactivities.

The basic objective of NBP’s activity is tomaintain price stability. According to themedium-term monetary policy strategyfor the years 1999 - 2003, a medium-termtarget of the NBP is to reduce inflationbelow 4 per cent by 2003.

NBP President Leszek Balcerowicz said ata press conference in November 2001

that inflation may fall below 5 per cent bythe end of the year and may even stabili-ze in 2002. Since the beginning of theyear 2001 interest rates have been cut bya total of 600 base points. The EconomistIntelligence Unit estimates the inflation of2002 to be about 4.4 per cent.

FUTURE PROSPECTS Poland has recorded the strongest eco-nomic growth of all Central and EasternEuropean (CEE) countries over the pastten years. However, during 2001, growthhas dived and unemployment has passed18 per cent due to the central bank’snumerous rate hikes in 2000, bringing theinterest rate above 19 per cent at onetime. The NBP introduced this monetarytightening to curb inflation and inflationhas indeed gone down, but at the sametime economic growth slowed dramati-cally. During 2001 the NBP has started tocut rates. However the interest rate levelremains high and further cuts are in sightin 2002, which might cause growth toregain some momentum in 2002. After thelatest rate cut in January 2002 the KeyMarket Rate is now at 10 per cent.

Despite the currently negative economictrends, the long-term outlook for the Polisheconomy is relatively positive. As Polandstarts to recover, annual GDP growth mayreturn to the growth rates of the pastdecade of 4-5 per cent.

REFERENCES

[PAIZ]Polish Agency For ForeignInvestments, [Online]URL: <http://www.paiz.pl>[Cited January 2002]

[GIME] The Gdansk Insititute of MarketEconomics 2001Wojciech Dziemianowicz and MartaMackiewicz, Banks and Business EnvironmentInstitutions in Poland

[BP]Foreign Trade Research institute,Ministry of Economy“Poland your business partner 2001”

[PG]The March 2001 edition of Prawo i

Gospodarka 2001

[DBP]Niels Valdemar Hansen, VicePrecidentURL:<www.unido.pl> [Cited February2002 ]

Financial Times Poland survey 2001,[Online]URL: <www.Ft.com> [Cited December2001]

Warsaw Stock Exchange[Online]URL: <www.gpw.com.pl> [CitedFebruary 2002]

The Warsaw Voice 4 November 2001No. 44 (680)

Schroders Report, Polish banks:Growth, Profitability, Risk, August 1999

44

45

46

THE EMBASSY AND CONSULATETHE ROYAL NORWEGIAN EMBASSYThe Royal Norwegian Embassy of Polandis located in Warszawa. Its main purpose isto maintain and nourish official contactbetween the Norwegian and Polishgovernments as well as to keep the homeauthorities informed on the political andeconomic situation in Poland. In additionto the political work, the Embassy promo-tes economic and cultural contact bet-ween the two countries and supportsNorwegian and Polish business communi-ties and citizens. For instance the Embassyarranges seminars and trade fairs often incollaboration with the Norwegian TradeCouncil. Another example of this work isthe Norwegian Trade- and PromotionCouncil, a forum with participants fromthe Embassy, Norwegian companies, theNorwegian Trade Council and theNorwegian Seafood Export Council. In thisforum representatives will inform aboutactivities taking place in their organizationand look for possibilities for commonevents.

EMBASSY OF THE REPUBLIC OFPOLANDEmbassy of the Republic of Poland in Oslois mainly engaged in bilateral govern-ment negotiations with Norway. Howeverthe economic and commercial sectionhandles business related affairs.

ROYAL NORWEGIAN CONSULATESIN POLANDThere are three Norwegian consuls inPoland, located in Krakow, Szczecin andGdynia. All three are honorary consuls,which mean that they execute their con-sular duties in addition to being employedin a company. The consulates in bothKraków and Szczecin assist Norwegiancompanies with commercial matters,while the one in Gdynia only assists in pri-vate matters.

NATIONAL RESOURCE CENTRESNORWEGIAN TRADE COUNCILThe Norwegian Trade Council (NTC) is thenational resource centre for private enter-prises and the authorities in the fields ofexport and internationalization. The NTC isa foundation owned equally byConfederation of Norwegian Business andIndustry (NHO) and the Ministry of Tradeand Industry (NHD) and performs bothofficial and consulting services. InWarszawa the NTC is also the commercialsection of the Royal Norwegian Embassy.

The official services the NTC provide aremainly focused on promoting Norwayand Norwegian trade and industrytowards foreign companies and businessenvironments. NTC organizes trade dele-gations, exhibitions and campaigns, often

Support Facilities

Examples of involvement

As a part of the Norwegian Embassy'swork to promote contact betweenNorway and Poland, there will be aPolish - Norwegian business seminar inTarnòw in April 2002. Arranging thisseminar in southern Poland is also apart of the Embassy's plan to enhan-ce contact and explore the businessopportunities in parts of Poland outsi-de the Warsaw region. BothNorwegian and Polish businesses areexpected at the seminar, and it willactively try to match those who havecommon interests with respect totrade and investments. TheNorwegian Embassy will also berepresented at Baltexpo 2002 (seethe section on Shipbuilding) andPolfish 2003, to promote Norwegianbusinesses and strengthen contactsbetween the two countries.

Norwegian Business Forum

The Norwegian Business Forum is aninformal association of representati-ves of Norwegian companies establis-hed in Poland. The associationarranges lunch meetings and otheractivities focusing on networking andsocial events. Carsten Nilsen, presi-dent of Group 4 Polska, is the headof the Norwegian Business Forum

48

NORWEGIAN FUNDS AND SUP-PORT ORGANISATIONS

There are several organizations and fundsthat support Norwegian business venturesin Poland. We have only mention a selec-tion of those we find most important. Agreat opportunity for Norwegian busines-ses investing in environmental technologyin Poland is the EcoFund. The EcoFund isnot mentioned here as it is thoroughly tre-ated in the Energy and Environment sec-tor.

THE NORWEGIAN INDUSTRIAL ANDREGIONAL DEVELOPMENT FUNDThe Norwegian Industrial and RegionalDevelopment Fund (SND) is the govern-ment’s most important financial tool inNorwegian business development.Through the Investment Fund for Easternand Central Europe, SND can be an acti-ve and long-term investor in Norwegianprojects in Poland. With SND as an inves-tor, the project’s risk might be reduced asSND has a staff with long experience fromEastern Europe and the advantage ofbeing a governmental institution. To investin a project SND demands that it is basedon a good, feasible business idea andhas a project plan showing that the pro-ject will be profitable. A Norwegian priva-te co-investor is also a requirement set bythe SND. The investment fund amounts toNOK 120 million and is run on a commer-cial basis. Usually SND does not invest inmore than 35 per cent of a project and

never more than NOK 15 million. The divisi-on for Russia and Eastern Europe in SNDmanages the Investment Fund for Easternand Central Europe.

THE NORDIC INDUSTRIAL FUNDThe Nordic Industrial Fund is the collabo-rative body for the Nordic countries inindustrial research and development. Thefund seeks to stimulate, initiate and finan-ce research and development in Nordicindustry. To be entitled to economic sup-port from this fund, a project must includeparticipants from at least three Nordiccountries.

THE INDUSTRIAL DEVELOPMENTCORPORATION OF NORWAYThe objective of the international depart-ment of Industrial DevelopmentCorporation of Norway (SIVA) is to facilita-te the internationalization of Norwegiansmall and medium-sized companies, withparticular emphasis on the Baltic region.Today SIVA has established industrial andbusiness parks in Murmansk in Russia,Panevezys in Lithuania and Ogre inLatvia. SIVA has several projects underdevelopment in the Baltic countries,Russia and Poland. The internationaldepartment of SIVA has long experiencein assisting business ventures in the Balticregion and can assist Norwegian compa-nies also where SIVA does not have indus-trial and business parks.

Support Facilities

NATIONAL RESOURCE CENTRES

Norwegian Trade Council

Drammensveien 400243 Oslo, NorwayPhone: +47 22 92 63 00Fax: +47 22 92 64 00Web page: www.ntc.no

Norwegian Trade Council

ul. Srebrna 1600-810 Warsaw, PolandPhone: +48 22 699 72 41Fax: +48 22 627 39 87Web page: www.ntc.no

Economic and Commercial Section ofthe Embassy of the Republic of Poland

Uranienborg terrasse 110351 Oslo, NorwayPhone: +47 22 60 24 48Fax: +47 22 56 53 81E-mail: tradepln@online.no

Polish Agency for Foreign Investment

al. Roz 200-559 Warsaw, PolandPhone: +48 22 334 98 00 Fax: +48 22 334 99 99Webpage: www.paiz.pl

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49

EMBASSIESThe Royal Norwegian Embassy ofPoland

ul. Chopina 2a00-559 Warsaw, PolandPhone: +48 22 696 4030Fax: +48 22 628 09 38E-mail: emb.warsaw@mfa.no

Embassy of the Republic of Poland inNorway

Olav Kyrres pl 1 0273 Oslo, NorwayPhone: + 48 22 43 00 15Fax:+48 22 44 48 39

EXPORT FINANCING ANDINSURANCE

The Norwegian Guarantee Institute forExport Credits

Postboks 1763 Vika0122 Oslo, NorwayPhone: +47 22 87 62 00Fax: +47 22 83 73 58Web page: www.giek.no

Eksportfinans ASA

Dronning Maudsgt. 15PB: 1601 Vika, 0119 Oslo, Norway

Phone: +47 22 01 22 01Fax: +47 22 01 22 02Web page: www.eksportfinans.no

NORWEGIAN SUPPORTORGANIZATIONS AND FUNDS

The Norwegian Industrial andRegional Development Fund (SND)

Akersgata 13Postboks 448 Sentrum0104 Oslo, NorwayPhone: + 47 22 00 25 00Fax: + 47 22 42 45 00Web page: www.snd.no

The Nordic Industrial Fund

Holbergs gate 10166 Oslo, NorwayPhone: +47 23 35 45 40Fax: +47 23 35 45 45Web page: www.nordisk-industri-fond.no

The Industrial DevelopmentCorporation of Norway (SIVA)

Leiv Eiriksson senter7462 Trondheim, NorwayPhone: + 47 73 54 62 00Fax: + 47 73 54 62 50Web page: www.siva.noE-mail: internasjonal@siva.no

References

Ambassador Sten Lundbo, The RoyalNorwegian Embassy of Poland, mee-ting 3 January 2002

First Secretary Merete K. Wilhelmsen,The Royal Norwegian Embassy ofPoland, meeting and corresponden-ce January 2002

Market Adviser Hege Haaland, TheNorwegian Trade Council, meeting 9January 2002

Elin Ersdal, The Norwegian Industrialand Regional Development Fund(SND), correspondence January 2002

Igor Jelinski, representative for the

head of Economic and CommercialSection of the Embassy of theRepublic of Poland in Oslo, corres-pondence January 2002

Contact person for Poland AnnaPodchivalova, The IndustrialDevelopment Corporation of Norway(SIVA), correspondence January 2002

The Norwegian Trade Council,[Online]URL: <http://www.ntc.no> [CitedJanuary 2002]

The Norwegian Industrial andRegional Development Fund (SND),[Online]URL: <http://www.snd.no> [CitedJanuary 2002]

One of the most important comparativeadvantages of the Central and EasternEuropean (CEE) countries is accessibilityto relatively cheap and good qualitylabour. According to a postal survey[OCE] availability of cheap, skilled labourwas the second most important factor dri-ving investment (number one was accessto the market).

Through the EEC agreement Polish wor-kers will get free access to the Norwegianlabour market through an EU members-hip. The Norwegian government has sta-ted as for December 2001 that no barrierswill be set. This opens up a vast labourmarket for Norwegian businesses.

FACTS ON GETTING LABOURTO NORWAYWhat are the current and future possibiliti-es of getting non EU/European EconomicArea (EEA) labour to Norway?

CURRENT SITUATIONAnnually, several hundred skilled workersfrom outside the EU/EEA area, obtain jobsin Norway. This is based on the conditionthat the labour is not available within theEU/EEA area, which is coordinatedthrough the EURES organisation(EURopean Employment Services).

In addition, several thousand unskilledlabourers come as seasonal workersduring the harvesting periods.

FUTURE POSSIBILITIESEventually, when Poland becomes amember of the EU, the Polish workforcewill also have access to the Norwegianjob market because of the EEA agree-ment. The Norwegian government has, asmentioned in the introduction, stated thatthere will be no barriers set on Polishlabour immigration.

LEGISLATIONCurrently a group set up by theNorwegian government is working onpotential changes in the existing foreignlaw. Their goal is to make it up to date,less bureaucratic and more flexible. Oneexample is the abolishment of quotas onforeign seasonal workers in the agricultureand forestry sector. The new delegation ofapproval authority regarding work permitsto some Norwegian embassies (Vilnius,

Riga, Tallinn, Moscow, Riga, and Ottawa)is another example. Since these are cur-rently changing, it is our recommendationto study in closer detail the web pages inthe “Sources of information” section.

Nonetheless these are some importantrules to be aware of:•As an employee you must pay the fore-ign skilled workers the same wage andsalary as Norwegian workers. •The work permit procedure can takefrom one to three months.•The Immigration Regulations require thatwhen a foreign national is to stay inNorway for more than three months, he orshe must be informed of the duty toundergo an examination for tuberculosis.

ANALYSIS OF THE POLISHWORKFORCE

The Polish workforce has a reputation ofbeing well educated, quick learners andflexible [PAIZ]. With some 30 million peopleof working age, the Polish labour market isone of the largest in Eastern and CentralEurope. The Polish population is relativelyyoung, with an average age of 35 years.The population in 2000 decreased by tenthousand, but the number of persons inthe productivity age* increased by 230000. Over the next five years about 3.5million people will reach the age of 18. Inthe same period about 2.5 million peoplewill reach retirement age. This means thatthe net creation of jobs must be at least 1

Human Capital

50

Sources of Information:

The Labour Market Administrationwww.aetat.noTel: +47 22 98 71 00

The Norwegian Directorate ofImmigrationwww.udi.noTel: +47 23 35 15 00

EURopean Employment Serviceshttp://europa.eu.int/comm/employment

*Productivity age: 18-59 for women, and 18-64 for men.

million just to maintain the current rate ofemployment. At the same time the cur-rent rate of unemployment is 18,4 percent [CESTAT] and it is expected to incre-ase during 2002. This means that there willbe substantial number well qualified ofjob seekers in this time period. The unem-ployment rate is highest among theyoung under 24, even though they areoften very well educated. In fact, Polandhas with its nearly 300 higher educationinstitutions more students than GreatBritain.

UNEMPLOYMENT

The unemployment issue is undoubtedlyone of Poland’s major current and futureproblems. Nearly 19 per cent of the work-force (about 3 million people) is currentlywithout jobs. For every 10 workers, 8 arereceiving pensions, social security benefitsor are unemployed. This clearly indicatesthe gigantic social difficulties, and is for-cing young people to take an education. Bear in mind, though, that there are geo-graphic differences within Poland. Socialconditions vary from region to region andamong vocational groups. Warsaw is theeconomic centre in Poland, with anunemployment rate at about 4.5 percent, close to the natural rate. In theGdansk\Gdynia area in the north theunemployment rate is close to 20 per

cent, while in many rural areas unemploy-ment is up to 25 per cent.

COST OF LABOUR

The cost of labour has been a comparati-ve advantage for all CEE countries sincethe transformation into market economi-es. However, the cost differences are notas significant as they used to be. This isparticularly true for Poland, which thesedays has the highest wage level in theCEE region. The current high or strong PLN

makes the wage levels even more expen-sive.

Recently PSA (Peugeot Citroen andToyota Motor Corp.) chose the CzechRepublic over Poland and Hungary as thelocation for a new joint factory to buildsmall cars for the European market. Thiswas partly due to labour costs [AUTO].

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WHAT ARE THE MEDIUM TERMPROSPECTS FOR OUTPUT ANDTHE LABOUR MARKET?

[Taken from the OECD Survey 2001]

Prospects for net job creation are notmuch promising. The social modelthat has been promoted in the 1990sby the coalition governments hasmany features that are not employ-ment-friendly. Employment protecti-on is widespread, resulting in a rigidlabour market. Wage indexation

Figure: HC 2

Figure: HC 1

The increase of nominal gross salaries hasbeen higher than annual average increa-se in the prices since 1994. In the peri-od1992-2000 an increase of effectivesalaries was registered to be 26 per cent.[MG]The minimum wage is high at 40 per centof average wages, or PLN 760. Accordingto professor Kabaj, at the Institute ofLabour and Social studies, more andmore enterprises are paying the minimumwages. Automatic wage indexation iscommon in the public sector, addingrelentlessly to costs, and rules governinghiring and firing are restrictive [FT].

The income of families living on retirementpensions was slightly higher than average(in 1999), amounting to USD 2,743 percapita [PAIZ]. In general, wages and sala-ries in the urban areas are considerablyhigher than in rural areas.

As a result of the wage growth manycompanies are focused on how to incre-ase productivity with better technologyand better use of machines. Still, as seenin Figure HC 4, wage and salary levelsvary considerably within workgroups.

Human Capital

52

mechanisms and the non-differentia-ted minimum wage lead to highlabour costs that crowd out the lowskilled workers. Generous early-retire-ment and disability pensions have ledto huge increases in social securitycontributions. Policies to cut laboursupply have failed to achieve theirintended goal because many recipi-ents have remained active. In additi-on, they have narrowly focused onthe short-term target of reducingunemployment figures, and failed torecognize labour resources as adevelopment factor. Finally, publicemployment services do not fosteractive job search, and there is virtual-ly no individual follow-up of theunemployed. In these circumstances,it is likely that structural unemploy-ment has already reached a highlevel. A particularly worrying feature isthe low employment rate amongschool leavers, with inevitable socialimplications. Thus, without majorreform in labour market policies,Poland may suffer from the similarlychronically high unemployment thatconfronted other OECD countries inthe past.

HOW TO FOSTER JOB CREATIONAND FIGHT UNEMPLOYMENT?

An important step to foster job creati-on and fight unemployment, is tolower the tax wedge, so as to reducelabour costs. The recent pensionreform has helped in this respect,because it transformed old-age pen-sion contributions from taxes tosavings, and abolished widespreadearly retirement schemes. But it willtake time for people to internalisethese reforms and adjust to newincentives. In the meantime, cuttingSocial Security contributions at theminimum wage level and slightlyabove it would be particularly impor-tant in raising the employability oflow-skilled workers. Disability pensioncontributions could also be reducedfrom their presently high level, withboth a tightening of eligibility criteriaand a shift of financing to indirecttaxes, for instance, environmentalrelated taxes, as suggested below.Lowering the personal income taxrate would also be important to alle-

viate the tax burden of the low-paidand make work pay. Another impor-tant step would be to make workingtime more flexible, so that companiescan adjust work schedules to theiractivity peaks and avoid payinglarge overtime premiums. A concretemeasure in this direction would be topromote the annualization of workingtime. Labour offices need to becomemore pro-active and make thelabour market function better. Thiswould involve a greater degree ofcooperation with employers to betterassess their specific needs. Labouroffices should also draw up individualplans with each unemployed personthat would chart strategies to re-enterthe labour market, including retrai-ning. This effort should focus first onyoung unemployed persons so as toleverage their human capital andencourage participation in the labourmarket because, for them, the transi-tion from school to employmentseems particularly difficult.

SOCIAL SECURITY CONTRIBUTIONS

In 2001 the total social security chargesamount to 36.59 per cent of the salary, ofwhich the employer pays 17.58 per cent.

In Poland it consists of the following kindsof insurance: pension, disability, accident,and sickness insurance. Contributions tothe pension and disability insurance arepayable until the gross cumulative annualremuneration of the given individualexceeds the cap amount (54,780 PLN in2000). Contributions to the sickness andaccident insurance are paid at all salarylevels. The Social Security Institution (ZUS)transfers 7.3 per cent out of 19.52 percent of pension insurance collected tothe open pension funds for all employeesthat are pension fund members. The man-datory ZUS contributions are payable ona monthly basis. The amounts of contribu-tions payable by an employer and anemployee to each kind of insurance areshown in Figure HC 3.Wages and salaries are paid in Polish cur-rency at least once a month. The workinghours are to amount to 8 hours a day and42 hours a week on average.

PRODUCTIVITY

The wage level is one side of the picture,productivity is another and very importantone. As the previous section showed,Poland has the highest labour unit cost inthe CEE countries. But how is productivity?

Dynamic economic changes and theshift from public to private sector resultedin increased productivity, a willingness tolearn, and responsibility. In the period1990-2001 employment decreased by 8per cent but GDP increased about 50 percent [MK]. This represents an enormous

increase in productivity, in fact the hig-hest in Europe during this period.

Example:In 1998, the number of bank offices roseby 21 percent (excluding PKO BP, which

closed 730 offices). Nevertheless, theincrease in the number of branch banksdid not involve a rise in employment,which went up by only 1 percent.

In the short run the quality of labour canbe determined by its productivity. In the

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Some Facts

Minimum salary: 760 PLN/ MONTHAverage salary: 2043,55 PLN/ MONTH

Pensionable age/pension rights: 65 years for men 60 years for women

Working hours: 42 hours a week on average (8 hours a day)

Dismissal regulations depend onlength of service:6 months- 2 week’s notice6 months-3 years 1 month’s notice3 years plus 3 month’s notice

Figure: HC 4

Figure: HC 3

long run a company can increase its pro-ductivity by improving the skills of the wor-kers. If the workers are well educated,

new skills will be acquired quickly, andgeneral productivity levels can rise sub-stantially. According to foreign investors[OCE] workers in transition economieshave considerable training needs. Forpolicy makers this means that educationand training have to receive more atten-tion if the legacy of high educationalachievement is to be maintained andwhether it is to be translated into job opp-ortunities for those who have acquiredgood formal education.

A number of economies in transition cont-inued to experience a dramatic decrea-se in real manufacturing wages followingpolitical, social and economic reforms inthe early 1990s. However, in some Centraland Eastern European economies andsome Baltic States, the downward trendhas been reversed. Most notably, realmanufacturing wages have risen marked-ly in Poland since 1990, and more inCroatia, the Czech Republic, Latvia andLithuania. It is an important fact that the Polish agri-cultural sector strikes the productivity levelquite hard, although it is currently goingthrough major reforms. The agriculturalsector employs between 18 and 23 percent of the total workforce but the contri-bution to GDP is only about 5 per cent.

Professor Kabaj emphasized that there islittle reason why Polish manufacturingworkers should be less productive inPoland than in Western Europe, as long asemployers use the right methods to moti-vate the workers. Productivity is a matterof equipment, organisation, manage-ment and motivation.

WORKING CONDITIONS

Many foreign firms are considerably moreproductive than Polish firms, muchbecause of the availability of capital, andtherefore have the best locations andmachinery to perform business. But thereis still a huge potential. Professor Kabajstressed the negative manner in whichmany Polish workers are treated. Lack ofpromotional possibilities and little motivati-on have resulted in lower productivityfrom workers. The dreadful treatmentmany Poles experience is in deep con-trast to the communist era, where theworker was seen as the most importantfactor of production. Therefore it is a bigmistake to think one can treat Polish wor-kers badly just because there is extensiveunemployment and the workers needmoney. A recent survey conducted atone at one university showed that 70 percent of entrants to the labour market pre-ferred public versus a private, and themain reasons were due to low wages,high intensity and lack of good treatmentin many private jobs. These factors haveincreased the Poles` scepticism to foreigncompanies.

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Another area of a potential enhance-ment, according to Professor Kabaj is tochange the payment systems. Too manyfirms are paying by the hour and not byresult. If a firm pays by result and in additi-on paying them above minimum wage-levels, it will generate more productivityfrom the workers. In a country with lowlevels of wages (like Poland), an increasein wage will have much greater effect onthe workers productivity than in countrieswith higher level of wages. Kabaj says:"Pay higher wages for higher productivity.Pay by results!"

LEGISLATION

Polish labour law is based on the LabourCode. Acts on other legal sources thatapply to employees must never worsenthe situation of the employee, as it is writ-ten in the Labour Code.

EMPLOYMENT CONTRACTA written employment contract is com-pulsory. There are three types of con-tracts:

•For an indefinite period•For a definite period•For the time of completion of a specifictask

Each of these contracts may be prece-ded by a trial period for up to threemonths.

Employees have the legal right to partici-pate freely in trade unions. This cannot belimited in an employment contract. Tradeunions are common especially in bigstate-owned enterprises.

You can hire an employee for a shorttime, up to 6 months each period. Thethird time the employer must hire withouta limit of time. You can hire a personseveral times on short-term contracts if it ismore than one-month time between ter-mination and hiring.

This has lead to a substantially highernumber of turnovers. In CEE only Hungaryhas a higher turnover. Also many changejobs because of negative/unfair treat-ment.

Since the rate of unemployment thesedays are at a record high, some firms

employ a high number of workers on ashort time basis. This is especially favou-rable for firms in business sectors withrapid changes in the amount of work. Forexample, the welding industry has foundit these days easy to expand productionby hiring additional workers on short-termcontracts [MOGD]. Other firms try toavoid the turnover in order to establish abetter and more stable personnel policy.

FOREIGNERS Polish legal entities may employ foreignersonly if a Polish national cannot be found.

Norsk Hydro, Statoil and Telenor havewell-established businesses in Poland.Even though, they have very fewNorwegians employed. One of thereasons is the difficulty of getting work-permits. In general, you must be Polishspeaking to be employed.

RECRUITMENT

When a new company wants to establishin Poland, it is first recommended [NTC] tosearch for a person that will manage it.Often the recruited manager will thenrecruit additional staff on his own (eitherby press/Internet ads or more often – byhis network of contacts).

There is also a large number of Polish andinternational recruitment companies inPoland. They vary in size and specializati-on, but still ads in newspapers are verycommon. It is quite expensive to outsour-ce the recruitment procedure, and that isprobably the reason why ads are so com-mon. Furthermore, it is for the most part,not difficult to find workers with the cur-rent rates of unemployment.

The Norwegian Trade Council does alsohave a considerable recruitment experi-ence.

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Human Capital

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REFERENCES

[CESTAT]Central Statistical Office of Poland2001 [Online]URL: <http://www.sigov.si/zrs/eng/ces-tat/cestat21.pdf > [Cited February2002]

[OCE] Office of the Chief Economist at theEuropean Bank of Reconstruction andDevelopment -London, May 2000, [Online] URL:<http://www.ebrd.com> [Cited16 Jan 2002]

[From the OECD Survey 2001]OECD Survey on Poland 2001 [Online] URL: <http://www1.oecd.org/publica-tions/Library/webook/00-2001-72-1/5.htm>[Cited February 2002]

[PAIZ]Polish Agency For Foreign Investment,Consumer MarketURL: <http://www.paiz.gov.pl>

[MK]Mieczyslaw Kabaj, Professor of LabourEconomics and Social Policy, meeting9 January 2002

[MOGD] Zbigniew Deinrych, Mostostal Gdansk,meeting 15 January 2002

[FT]Financial Times, Poland 2000 survey

[Online] URL:<http://specials.ft.com/ln/ftsurveys/country/sc231aa.htm>[Cited February 2002]

[NTC]Royal Norwegian Trade Council,Warsaw Office, meeting January 2002Hege Haaland

[MG]Economy 2000 report, Ministry ofEconomy

[AUTO]Auto.com December 21, 2001[Online]URL:<http://www.auto.com/industry/iwirj21_20011221.htm, online> [Cited February 2002]

Foreign Trade Research Institute,Ministry of Economy“Poland your business partner 2001”

United Nations IndustrialDevelopment Organisation“How to do Business in Poland2001”,[Online] URL:<www.unido.pl> [Cited February2002 ]

Kaare Nordbø, Segel, meeting 8January 2002URL: <http://www.segel.no>

Arthur Andersen, Warsaw FinacialCenter, 2001Domanski, Zakrzewski, Palinka, “DoingBusiness in Poland”

Human Resources Companies

www.intersearch.org/pl SMG/KRC Poland Human Resourceswww.ipk.com.pl Institute for Personnel Promotionwww.neumann.com.pl Neumann Groupwww.intersource.com.pl Group of companies – Permplus, Tempservice, …www.notio.com.pl Personnel Progress Assistancewww.profesja.com.pl Profesja Consultingwww.bankkadr.com.pl Test - Personnel Data Basewww.naj.com.pl NAJ International Executive Searchwww.beaver.com.pl Personnel Consultingwww.hill.com.pl Hill Internationalwww.antal.com Antal International Ltdwww.turnaround.pl Turnaround Sp. z o.o.www.adecco.pl Addecco Polandwww.topjobs.pl Topjobs

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58

TRANSPORT SYSTEMPoland has a well-developed transportinfrastructure. There are approximately358 thousand kilometres of roads and anextended railway network of over 23thousand kilometres linking all the majorcities and towns. Nevertheless the roadand rail system is somewhat outdatedand in need of an extensive overhaul.Poland’s central geographical position,linking the east to west and the north(Scandinavia) to the south, means it isobliged to develop an efficient transportnetwork, adapted to European standards.

MEANS OF TRANSPORTThe structure of the Polish transport systemis reflected in the share of goods distribu-ted in 2000. All in all there were approxi-mately 641 million tons transported, mostlyby roads. Even though motor transportaccounts for well over a half of goodstransported in Poland, motorways (two-lane public roads) account for only 3.2per cent of national roads.

Railway transport in Poland is fairly acces-sible thanks to the dense network offreight stations (some 2000) and over 1700passenger stations. Enhancing the speedand quality of rail services would make itpossible to compete effectively with roadand air transport. Polskie Koleje Pastwowe (PKP) is amongothers planning to build logistical centresbased around the existing railway termi-nals. The centres will offer customs clea-rance, storage and transfer of goods andare planned to be opened in Warszawa,Gdynia, Szczecin, Gliwice, Wroclaw,Maaszewicze and Poznan. These locati-ons are considered to be the most impor-tant Polish hubs in the European anddomestic network of major rail transit rou-tes, processing container and tranship-ment terminals as well as specializedinfrastructure.

Transportation of goods by rail is intendedto be liberalized. The Polish Governmentinsists on a transitional period until 1January 2006. From this date it is imposedthat any company will have access tothe international railroad system leadingthrough Poland. The fee required will bethe same as paid by the PKP (PolskieKoleje Pastwowe).

The air transport infrastructure has its nati-onal and international hub in Warszawa,

Okecie airport. Gdansk and Kraków air-ports and, to a lesser extent, some regionalairports should increase their share in inter-national traffic. Over the next decade, it isplanned to improve terminals, parking

facilities, and signing and approach sys-tems at airports in Gdansk, Kraków,Wroclaw, Poznan and Warszawa.

Maritime transport, especially passengertransport by sea in the Baltic is growingstrongly and the forecasts confirm thistrend. [ECMT]

In 1999 there were 104 seaports for cargohandling and storage. According to thecentral statistics office, centre of maritimestatistics the largest seaports, with referen-ce to their size, are Gdansk, Gdynia,Szczecin, Swinouiscie, Police, Stepnica,Kolobrzeg, Ustka and Elblag. During theyear of 2000, the first four of the aboveseaports handled close to 94 per cent ofthe total freighted tonnage in Poland.[GUS]

The main groups of handled cargo areshown in the following graph:

ROAD CONSTRUCTIONMeanwhile, the transport is focused on thenational roads that total 45 700 km andare divided into two categories: • Inter-regional roads, total length of 11500 km, numbered with one and twodigits. • Regional roads, total length of 34 200km, numbered with three digits. As far as transit is concerned, the networkof international roads has a total length ofsome 5 500 km.

Transportation Infrastructure

0 20 40 60 80 100

General cargoes

Other bulk cargoes

Crude petroleum and p

Wood

Grain

Ores

Coal and coke

Police

Swinoujscie

Szczecin

Gdynia

Gdansk:

Figure: Trans 1

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The programme of building a network ofmotorways in Poland was adopted by theOrdinance of the Council of Ministersdated 28 September 1993. It suggests theconstruction of four main motorways in thenext 20 years, some 2 300 km of toll motor-ways.

The Motorway Construction in PolandProgramme anticipates the construction ofa network of four motorways, two runningfrom east to west, and two from north tosouth: A-1 (597 km) Gdansk - Torun - Lódz -Katowice - Czech Republic border, A-2 (626 km) German border, crossing inSwiecko - Poznan - Warszawa - Belarusianborder, crossing in Terespol, A-3 (365 km) Szczecin - Gorzów - ZielonaGóra - Legnica - Lubawka, A-4/A-12 (738 km) German border, cros-sings in Jedrzychowice near Zgorzelec andin Olszyna - Wroclaw - Opole - Gliwice -Katowice - Kraków - Rzeszów - Ukrainianborder, with the A-12 branching Olszyna -Legnica.

Construction of A-1, A-2 and A-4/A-12motorways has been given priority. The A-3is estimated as less likely to experiencesuch high traffic volumes as the otherones.

The basic document setting the legalgrounds for implementation of this pro-gramme was the Law on Toll Motorways of27 October 1994, which came into forceon 1 January 1995. The Agency forMotorway Construction and Operation(ABEA) was established to monitor the exe-cution of the Motorway Programme.

At the beginning of 1999 the governmentdecided to replace the BOT (Built-Operate-Transfer) system of motorwayconstruction with a PPP (Private-PublicPartnership) system that would oblige theState to co-finance construction or tocover up to 50 per cent of the operatingcosts. In return the State would gain theright to participate in the profits, or toshare the risk of low incomes. The newLaw on Amending the Law on TollMotorways and Other Laws of 8September 2000 came into force on 17November 2000. The amendments streamtowards utilization of both public and pri-vate finance through PPP. The changesallow for a greater flexibility in selectingfinancing options, so they would bettersuit each individual case. The new soluti-ons envisage increased support of theState through the creation of the NationalMotorways Fund (KFA).

In March 2001 the government approveda programme for road construction andmodernization till 2015, with an aim toadjust the Polish road transportation sys-tem to EU standards. Currently only 1 percent of roads in Poland conform to EUstandards demanding international roadsto withstand axle load of 11.5 tonnes. Theprogramme envisages constructing 1 500km of motorways and 1 500 km ofexpressways and modernizing 2 500 km ofinternational roads and some 4 000 kmnational ones. It is expected that EU finan-cing will cover approximately half of theneeded investments. As of June 2001 there is only one, 61 kmlong toll motorway in Poland, runningfrom Katowice to Kraków.

References

Bychawski, Grzegorz (ed.), How to dobusiness in Poland 2001, UNIDO ITPOWarszawa 2001URL: <http://www.unido.pl>

Professor Bjørnland, Dag, NorwegianSchool of Management BI,Department of Logistics, meeting 1February 2002.

[ECMT]European Conference of Ministers of

Transport, Monographs on infrastruc-

ture, April 1997.

[GUS]Central Statistical Office, StatisticalOffice of Szczecin, Centre of MaritimeStatistics, "Polish Maritime Economy2000", June 2001

Ageyeva Irina, Shcherbatyuk Svitlana,Oliynyk Leonid and Kushnaryov Pavel,Development of road transport corri-dors in Ukraine, Benchmarking exerci-se – using experience of Poland, OsloDecember 2001.

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Part 3•Energy and Environment•Fish Exports and Industry•Shipbuilding•The Consumer Retail Market•IT Telecommunications

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Poland is on the verge of entering theEuropean Union. Negotiations for themembership have implied needs restruc-ture the energy and environment sector.Coal is the principal fuel for power gene-ration and heating of private sector, thusone of the main concerns. Other futurechallenges include plans to diversify theportfolio of natural gas suppliers to redu-ce vulnerability to external market fluctu-ations as well as the commenced privat-isation and liberalisation of the energymarket. The environmental work is beingtaken seriously in Poland. However, thehistory of heavy industry and reliance oncoal for power generation has made itcomplicated to deal with environmentalproblems.

ENERGY

Poland’s energy situation is similar to thatof other former Communist countries, rely-ing heavily on fossil fuels to meet energyneeds. The Polish power generation sec-tor, with a total installed capacity of morethan 34 000 MW, is the largest in Centraland Eastern Europe [PAIZ]. Projectionsshow that domestic demand for electrici-ty could grow as much as 50 per cent by2020. Currently, Poland’s installed genera-tion capacity exceeds domestic demandby approximately 30 per cent, and someof the excess electricity is exported toneighbouring countries.

The Polish energy sector has three sub-sectors. The first one is the generating sub-sector, which represents 50 per cent ofelectrical sector assets and consisting 54power- and heating plants. The secondone is the transmission sector (10 per centof assets), encompassing the transmissiongrid, wholly owned by Polskie SieciEnergetyczne (PSE). Distribution, with 33active companies, is the third sub-sector.Distribution firms buy electricity from PSE,which they transfer to end users [PAIZ].

COALCoal is by far the dominant fuel inPoland’s energy sector. Accounting for 95per cent of the country’s primary energyproduction and only representing 2 percent of Poland’s total GDP. Though it is ofhigh quality, Polish coal is found is foundin geological locations that are difficult tomine. Hard coal (mostly bituminous) provi-des about 65 per cent of electricity gene-

ration. Brown coal (lignite) providing near-ly all of the rest of the fuel consumed inPoland’s power plants (many of whichprovide heat and hot water as well aselectricity). Poland is the world’s ninth-lar-gest coal exporter, exporting primarily tocustomers in Europe and the formerSoviet Union. In May 1998, Polandannounced a comprehensive restructu-ring programme for the coal industryaimed at maximizing efficiency and pay-ing off some of the industry’s then USD 4.5billion debt. The changes brought aboutby the programme have had positiveeconomic and environmental implicati-ons, which are important for Poland’saccession to the EU [EIA].

NATURAL GASPoland has estimated 5.1 trillion cubicfeet (Tcf) of natural gas reserves andimported over 60 per cent of its 442 billioncubic feet (Bcf) consumption in 1999.Natural gas production remained fairlystable throughout the 1990s, between 150Bcf and 180 Bcf. This rate of production isexpected to continue into the 21st centu-ry, as new exploration takes the place ofdepleting reserves. Despite the fact thatPoland’s real GDP has grown by about 21per cent since 1997, natural gas demandhas remained static and is predicted toremain so over the next decade. Much ofthe reason for this is that natural gas issimply uneconomic for power generationin Poland compared with coal. Yet, at thesame time, diversification of gas sources isa high priority in Poland, and those tra-ders with diversified sources will have prio-rity [EIA].

The Polish gas industry network has some17.6 thousand km of high-pressure gaspipelines and nearly 90 thousand km ofdistribution network, 20 gas-pumping stati-ons and over 4000 stations to reduce andmeasure pressure. This system suppliesnearly 4000 towns and cities, with 6.7 milli-on domestic gas consumers. Forecasts ofPolish gas consumption predict that itscombined utility by households will increa-se from current 3.9 billion m3 annually, to4.8 billion m3 in 2010. Industrial users con-sume 5.5 billion m3 each year and shouldexpand to 7.7-8.4 m3 in the same period[PAIZ]. Concerning the EU demands,Poland is obliged to have an energyreserve for about 90 days. EU prefers gasfor such reserves. Today Poland is ably tosupply themselves only for about 20 days.

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63

This will mean that Poland will have tobuild containers and terminals for storinggas.

OILPoland has proven oil reserves of only 115million barrels, and relied on imports for 98per cent of its 2000 oil consumption. Oildemands are expected to increase by asmuch as 50 per cent by 2020. Despiteproduction of only 10 000 barrels per dayin 2000, this is a 100 per cent increase inproduction compared to previous years.Polish oil production comes primarily fromfields in southern and western Poland,with the southern reserves nearly exhau-sted. However, the Barnówko – Mostno –Budzewo “BMB” field discovered in 1996in the Polish part of the Permian Basin(near the German border directly east ofBerlin) has potential reserves of about 73million barrels and the Miedzychod field isestimated to have even more, so Polandshould be able to increase its volume asthese fields start production.[EIA].

ELECTRIC POWERWith installed electric capacity of over 30million kilowatt and 1999 electric generati-on of 134 billion kilowatt hours, the Polishpower generation sector is the largest inCentral and Eastern Europe. Most ofPoland’s electricity comes from coal-firedplants, which are highly polluting andoperate with outdated technology. ThePolish government expects electricitydemand to have grown by over 50 percent by 2020. The Polish electric grid ispart of the CENTRAL system, which linksthe Czech Republic, Slovakia andHungary. Poland’s status as an ascending EU mem-ber makes it more important that efficien-cy and environmental goals are met in atimely fashion. In November 1998, Poland

ambitiously committed to adapting itselectricity market regulations to EU stan-dards within four years. Renovations ofthe sector are expected to cost about

USD 15 billion by 2010. For these reasonsPoland’s power generation sector is inneed of large investments [EIA].

PRIVATIZATIONThe current process of demonopolizationand privatization is possible due to decisi-ons made in September 1996.Privatization is seen as the key to moderni-zation and increasing the efficiency ofthe electricity sector. However, privatizati-on has been delayed. According to thehead of the Energy Regulatory Office, itwill be two to four years until Poland’senergy market is truly competitive.

The Polish government plans to completethe first stage of privatization of 55 powerplants and combined heat and power(CHP) plants, and 33 distribution compa-nies. So far, only two power plants, fiveCHP plants and one distribution companyhave been privatized. Privatization ofpower generators will be performedsimultaneously with the privatization of dis-

Norwegian Gas to Poland

An intention agreement forNorwegian gas supply to Poland wassigned in September 2001. Energysecurity and independence from onesource, Russian gas, is an importantaspect for the Polish government.The agreement commits sales of 74billion m3 gas to Poland. The cost ofbuilding the pipeline is estimated toabout EUR 1.3 up to EUR 1.5 billion.The supply should start in 2008 andcontinue for 16 years. Statoil and the

Norwegian government throughPetoro AS are responsible for 66 per-cent of the gas deliveries to Poland.Total, Fina, Elf, Shell and Norsk Hydroare planning to share the rest of thedelivery. The Polish cooperation part-ner is the Polish Oil and GasCompany, POGC. The Polish -Norwegian agreement needsgovernment approval in both countri-es, and the deadline is set toDecember 2002 to get the approvalfrom the governments and in theboards of the companies [AP].

64

tribution companies, with emphasis onthe privatization of power generators.Under the currently binding governmentprivatization programme, the Treasury isempowered to tender stakes of up to 25per cent in power distributors, up to 35per cent in generators and up to 45 percent in combined heat and power plants.

Poland’s electricity sector is at themoment barely profitable due to govern-ment-set consumer prices and high fixedcosts stemming from massive modernizati-on loans. However, it is expected tobecome highly competitive in the comingyears.

LIBERALIZATIONThe Liberalization of the energy market inPoland began in 1998 with the introducti-on of a new Energy Law. A great deal ofwork has been done since then. However,there are certain issues that need to beaddressed in order to complete the task.The introduction of a compensating feesystem (SOK) to resolve the problem oflong-term power purchase agreementsand the launching of an hourly balancingmarket are now crucial for the creation ofpractical and competitive energy market.

The market is to function according to theprinciple of Third Party Access, whichfocuses on gradually giving consumersthe choice of where to buy electricity.Energy trading companies experienceproblems with discriminatory access tothe grid. There are also reservations aboutthe tariff system on the part of tradingcompanies. Also, the stiff system of appro-ving tariffs for energy companies blocsthe development of a flexible market andinfluences projections of future energy pri-ces.

A total liberalization of the energy marketis to be completed in Poland by 2005. Bythen, it is to function according to theprinciple of the third party access.Furthermore, in 2005, 37 per cent of thePolish domestic demand will be open toforeign suppliers [PAIZ].

POLAND AND EU ENERGY POLICYThe proposed enlargement of the EU willcomplicate the energy and environmen-tal policy. The major part of the energygenerated in Poland comes from powerplants and heat and power plants thatburn coal; hence, each unit of energyconsumed is associated with the releaseof carbon dioxide into the air. Poland hasmade great steps in improving its environ-ment over the past 10 years. However, thecountry continues to rely heavily on pollu-ting coal, and despite Poland's surgingeconomy, a major concern is Poland'sability to finance cleanup projects. Toxiceffluents continue to pour into Polishrivers, yet most polluters go unpunished,either due to the lack of legislation, or,because it is badly enforced, if it exists atall.

Margot Wallstrom, EuropeanCommissioner for the Environment, hasestimated that Poland must still spend upto EUR 139 billion cleaning up the environ-ment in order to meet EU criteria formembership. Although Poles point outthat, as a percentage share of GDP, theyhave consistently spent more than theOrganization for Economic Cooperationand Development (OECD) country avera-ge on environmental remediation, Polandstill has a long way to go to catch up. Inorder for Poland to meet the EU environ-mental criteria and accede to the Union,it will take more than money. Althoughthe shift is underway in Poland from coalmining and heavy industry to modern ser-vices and lighter, more advanced branc-hes of production, such as car manufac-turing, Poland's State Inspectorate forEnvironmental Protection 2000 Reportrecognized that the locus of environmen-tal threats is changing. In addition to theneed to switch from coal to cleaner ener-gy sources, the Report stated, "not theindustry anymore, but rather the growingindividual consumption of energy andfuels, as well as uninhibited motorizationgrowth, is posing ever increasing threatsto the environment".

Energy and environment

Figure: E&E1

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ENVIRONMENTAL ISSUESDuring the Soviet regime, Poland becameone of the most polluted countries inEurope. The last decade has shown largeimprovements in environmental stan-dards, and Poland has developed one ofthe most sophisticated approaches toenvironmental management in theCentral and Eastern European region.Currently Poland spends about EUR 2 billi-on on environmental work, about 1.7 percent of GDP [EIU]. This is considerably hig-her than the average of the OECD coun-tries, showing that the problem is takenseriously in Poland. There are two mainreasons why Poland still faces severe pro-blems; (a) the role heavy industry has his-torically played in the Polish economy,and (b) the country's energy culture andreliance on coal for power generation.Although pollution from power generationand industry has benefited from a largeinvestment programme in environmentalprotection technology over the pastdecade, sectors such as coal mining andother heavy extracting industries are issu-es of major concern. They continue toproduce considerable amounts of indus-trial waste, as well as polluting the atmos-phere. In addition to wastewater treat-ment, the toughest challenges for thePolish environment are air pollution andwaste management. These are areas thathave been in focus for quite some time,and will continue to be during this deca-de.

It is important to remember the huge regi-onal differences in environmental stan-dards in Poland. The most polluted areasare in the south and southwest, and mostof the environmental investments inPoland are implemented here.

MARKET CHARACTERISTICSThe Polish environmental market consist ofabout 1500 firms, most of them small ormedium-sized, but also a few large com-panies that operate on a broad field.There are many Polish companies on themarket, but more and more foreign esta-blishments are appearing. Joint ventureswith local firms are especially popular,and the most active foreign countriesinclude Germany, Sweden, Denmark,Switzerland and France. As mentionedearlier, the current market is worth aboutEUR 2 billion, and is expected to grow toEUR 4.5 billion during this decade. Thisshows the market still has a large potenti-

al for foreign firms. Presently, foreign firmsare most active within air pollution controland the wastewater sectors. In the wastemanagement sector, there are about 300active firms many of which are local.[CEEBIC], [TUK]High quality and long durability are themain reasons Polish firms choose foreignsuppliers, but they are still quite expensive.The most successful foreign companieshave used time and effort to establishcontacts with Polish companies and insti-tutions. They have also actively advertisedin local trade publications and attendedmajor environmental fairs. There are espe-cially two large fairs that should be ofgreat interest for environmental compani-es, namely Poleko and Intereco. Fordetails about these, see the informationbelow. Most Polish environmental projectsare very small and at a local scale, and itis very important to have a local presen-ce to reach out to these projects. Thismay be the problem for Norwegian firms,that are often small and with few resour-

ces to perform these tasks. Polish firmsalso find post-construction maintenance,equipment service and spare partsaccessibility very important. Norwegiancompanies should convince their Polishpartners and possible investors that theyare ready to provide this.

WASTE TREATMENTPoland is one of Europe’s largest wastegenerating countries, producing about126 million tonnes of industrial and 12.3tonnes of municipal waste. The wastemanagement legislation is recently upda-ted, but the implementation of thesedirectives still needs to be carried out. Theamount of industrial waste has beendeclining the last decade, while munici-pal waste has been fairly stable. Most ofmunicipal waste is deposited in dumps,while about 50 per cent of industrialwaste ends up in landfills. Poland has agreat lack of waste utilization facilities,

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and most dumps are full or in bad conditi-on. Especially poor are the Katowice andLegnica voivodships. They represent 70per cent of all industrial waste producedin Poland. Recycling is a relatively newissue, and is currently very underdevelo-ped; only 2.4 per cent of municipal wasteis recycled. The only efforts that are madewith results are within paper, glass andplastics. [CEEBIC]

The EU has allowed Poland transitionalperiods of 3-5 years in the field of wastetreatment, and there are great challeng-es to implement EU demands. Accordingto the World Bank the total expectedcosts to the Polish economy over the next15 years for meeting EU accessionrequirements for recycling and solid wastemanagement amount to about EUR 3.5billion. Poland is counting on foreign capi-tal to reach their goals in the field ofwaste treatment.

A very good resource in this field is theInstitute of Waste Management (IGO) in

Katowice. They have a lot of informationon industrial wastes, landfills, waste pro-cessing technologies, small waste quanti-ty technologies and waste free technolo-gies, machines and equipment for wastetreatment. IGO also works out solutions forindividual customers, and provides infor-

mation for Polish firms on technologiesand equipment available.

WATER QUALITY/WASTEWATERMANAGEMENTThere are two basic uses of water resour-ces in Poland, which most strongly affectthe quality and quantity of water. Theseare the use of water for economic purpo-ses and the use of rivers, streams andlakes as sewage receptors for differentbranches of the economy. It is estimatedthat 25 per cent of available waterresources is contaminated, especially inSilesia, Warszawa, Gdansk and Lodz. Thestate of groundwater quality is not as tho-roughly studied, as is surface water.

Over 83 per cent of the water used forthe national economy comes from surfa-ce water, 14 per cent comes from under-ground sources, and only approximately 2per cent comes from water discharge inmines. Water from mines meets therequirements for drinking water, howeverit is not used sufficiently. Only about 40per cent of the recovered mine water isutilized annually. Of all the industrial sec-tors, the power generating plants havethe greatest demand for water.

There is a growing need for the utilizationof groundwater. Only such water is sui-table for drinking and economic purpo-ses. In Poland this water occurs mostoften at depths of 200 to 300 metres.Because of the protection from directinflows from the surface by a filter of soil,the quality of groundwater is much betterthan that of surface water.

Groundwater is used to provide inhabi-tants, especially those of smaller towns, aswell as being used for reserves of gooddrinking water for future generations. Themain hazards for groundwater quality arepollution connected with agricultural acti-vities, atmospheric pollutants and villagesand cities that have no sewage treat-ment. In addition, there is the pollutionfrom municipal and industrial waste sites,petrochemicals and from roads.

Poland has been granted transitional peri-ods of 6 to 10 years concerning waterreservoirs, 8 years concerning sewage tre-atment and pollution from agriculturalsector, as well as 5 years concerningreduction of polluting elements in water.Still, within these periods, much needs to

Energy and environment

Major Environmental Fairs

International Environmental Fair POLEKO, Time of event: November every yearOrganizer: International Pozna_ Fair, Address: ul. Glogowska 14, 60-734Pozna_, Phone: (48-61) 869-2592 Fax: (48-61) 866-5827

International Environmental Fair INTERECOTime of event: March every yearOrganizer: International KatowiceFair, Address: ul. Bytkowska 1 b, 40-955KatowicePhone: (48-32) 204-2499 Fax (48-32) 254-0227

Source: [CEEBIC]

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be done regarding wastewater treat-ment, reduction of pollution of the surfa-ce waters and protection of groundwaterfrom infiltration by surface water pollutedby effluents. [SOE]

AIR POLLUTION CONTROL Maximum industrial activity with norespect to the environment led to enor-mous air pollution problems during theSoviet regime. But Poland has made largeefforts on this front during the last deca-de, and air quality has improved dramati-cally. It is observed an improvement ofabout 30-50 per cent, and focus is nowshifted towards “non-point” and mobilesource. These areas have experienced arise in pollution.

Although great improvements are made,there is still a long way to go before thelevels the EU demands are reached. Inthe field of air pollution, Poland is grantedtransitional periods of about 3-4 years insome areas. Adoption of the EU's"Integrated Pollution Prevention Directive,"mandating Best Available ControlTechnology (BAT) is a great step forPoland. It requires that plants use specifictechnology to control emissions, and willespecially force the non-power sector tofocus more on these problems. Many ofthese firms still operate under traditionalPolish air standards. BAT will inevitablylead to higher expenditures in other sec-tors as well. The Government has takenactions to encourage early adoption ofEU requirements, by issuing tariff reducti-ons to environmentally EU-compliantplants. There is concern in Poland whet-her local firms will be able to follow theserestrictions, and many fear that this willlead to several firms being closed by theGovernment. This will not be an easy soci-al issue in a country with almost 20 percent unemployment.

EU

As one of the countries applying for EUmembership, Poland is in the process oftough negotiations. In the case of amembership, National legislation has toadjust 100 per cent with requirements ofEU legislation. This includes the environ-mental aspects. Poland is looked upon asthe country with the greatest challengesof the applying countries, so theEnvironmental Chapter was an especiallytough one. Despite this, Poland managed

to close this chapter October 2001.Poland was granted transitional periods innine fields including water quality, wastemanagement and air pollution, some aslong as 10 years. None of the other appli-

cants were allowed such extensive transi-tional periods, showing that this really isan area of major challenges. The EU hasstated that Poland has “substantial lags inair pollution and waste management,”once again confirming that these will becritical issues in the years to come. It isestimated that as much as EUR 40 billionhas to be spent to fulfil the demands[EIU]. These are enormous amounts, andPoland will need considerable foreigncapital to manage this. The EU signals itwill only contribute with about 5 per centof this amount.

Support from the EU comes at themoment mainly through ISPA, theInstrument for Structural Policies for Pre-Accession.

FINANCING• Poland's National Fund forEnvironmental Protection and WaterManagement mainly supports projectsrecommended by regional authorities(Voivods). The most common form of pro-vided support consists of soft loans, butthey also provide grants, mainly to pilotprojects and promotional activities.

• Voivodship Funds for EnvironmentalProtection and Water Management, wor-king on regional level. These are the mainfinancial instruments and usually providesoft loans up to 50 per cent of the invest-ment cost. Grants are also given, mainlyto public authorities and Non-Governmental Organisations (NGOs).

• Nordic Project Fund (NOPEF) grantsfavourable loans to Nordic companies for

Figure: E&E 2

68

their feasibility expenses for project exportor internationalisation projects. The pro-ject must be located outside the EU andEFTA countries.

• Nordic Environment FinanceCorporation is a risk capital institutionfinancing environmental projects in CEE.

They do this through equity investments,different forms of loans and guarantees.

• Bank of Environmental Protection fundsoffers suitable preferential credits.

• The World Bank can be a possible part-ner for project funding.

• Local environmental funds on the levelsof county ("powiat") and commune("gmina") typically provide some grants,although priorities for funding differdepending on local development strate-gies. They mainly support environmentalactivities of local authorities.

• Global Environmental Facility SmallGrant Program of the United NationsDevelopment Program provides grants upto the level of USD 50.000, mainly for localauthorities and NGOs.

• Another institution offering grants forNGOs and local authorities is theFoundation for Environmental Partnershipfor Central and Eastern Europe.

Energy and environment

The EcoFund Foundation

The Minister of Finance establishedthe EcoFund Foundation in 1992 tomanage funds deriving from theexchange of part of Poland’s debtfor undertakings in the field of envi-ronmental protection. Half ofPoland’s debt to creditors from theso-called Paris Club was written off,while the remaining part was to bepaid off by Poland by the year 2010.It is part of these payments that arenow being paid into the EcoFundaccount. There are six countries thathave entered into the agreement.These are the United States, France,Switzerland, Sweden, Italy andNorway.

By the year of 2010 the agreementsecures USD 571 million that are cont-inuously being used to part-finance(preferential loans or non-refundablegrants) undertakings in the field ofenvironmental protection. There arefive sectors of environmental protec-tion considered to obtain a prioritystatus.

1. The limitation of emissions of gasescapable of inducing change in theEarth’s climate such as CO2, met-hane and CFCs. (i.e. climate protec-tion)2. The limitation of the transboundaryfluxes of SO2 and NOx, as well as theelimination of low sources of theiremission. (i.e. air protection)3. The restoration of purity of thewaters of the Baltic Sea, and the pro-tection of drinking water resources.(I.e. water protection)4. The protection of biological diversi-ty of Polish nature.5. The waste management andreclamation of contaminated soil.

The size of a grant from EcoFund isdependent on the nature of the pro-ject, as well as the legal status of theapplicant. If this is an enterprise, thenthe grant does not as a rule exceed20 per cent of the total costs. If localauthorities are behind a project, theEcoFund may cover up to 30 percent of the costs, while if those invol-ved are budgetary institutions or non-governmental organizations up to 50per cent or 80 per cent respectively

International Business

69

REFERENCES

[PAIZ]Polish Agency For ForeignInvestments, [Online]URL: <http://www.paiz.pl>[Cited January 2002]

[EIA]Energy Information Administration,[Online]URL:<http://www.eia.doe.gov/emeu/cabs/poland.html>[Cited January 2001]

[AP]Aftenposten, Norwegian newspaper,03.07.01, 04.09.01, 10.01.02, [Online]URL: <http://www.aftenposten.no>

[SOE]State Of Environment in Poland,[Online]URL:<http://www.mos.gov.pl/soe/index.html>[Cited January 2002]

[EUI]European University Institute, [Online]URL:<http://www.iue.it/RSC/environ-ment/Kramer.pdf>[Cited January 2002]

[TUK]Tradepartners UK, [Online]URL:<http://www.tradepartners.gov.uk/environment/profile/index/overvi-ew.shtml>[Cited January 2002]

[CEEBIC]

CEE Business Information Center,[Online]URL:<http://www.mac.doc.gov/eebic/countryr/poland/market2.htm>[Cited January 2002]

United Nations Environment Program,[Online]Poland Environmental Profile URL: <http://www.unep.net>[Cited January 2002]

Central Statistical Office, [Online]URL:<http://www.stat.gov.pl/english/index.htm>[Cited January 2002]

Zbigniew Dyk, Managing director ofBiovac, Chairman of the board, mee-ting 28 December 2001.

Professor Anna B. Kisiel-_owczyc,University of Gda_sk, Foreign TradeDepartment, meeting 17 January2002.

Ambassador Sten Lundbo, and firstSecretary Merete K. Wilhelmsen, TheRoyal Norwegian Embassy of Poland,meeting 3 January 2002.

Manager Poland, Ewa Grabarczyk,Statoil, Natural Gas Business, meeting8 January 2002.

http://www.climatcch.net/conferen-ces/warsaw

Ministry of EnvironmentII Polityka Ekologiczna Panstwa

may be covered. In each case,however, the level of the grant isdetermined be economic and envi-ronmental analysis carried out by theFoundation’s own experts.

The Board of the EcoFund is the bodydirecting the Foundation’s day-to-day activity and representing itelsewhere. It is responsible for the pro-per screening of applications, as wellas for ensuring the appropriate use ofthe grants awarded.

For more information: EcoFundBracka 4 St, 00-502 Warszawaphone: 0048-22-621-27-04fax: 0048-22-629-51-25www.ekofundusz.org.plinfo@ekofundusz.org.pl

70

With its 40 million people, Poland is alarge market for consumer products likefish. Due to the increasing standard ofliving and changeing preferences, thepotential for increased sales seems good.Fish exports account for about 30 percent of the total export value fromNorway to Poland. The outcome of the EUnegotiations will be very important for thistrade. Meeting EU standards and adap-ting to a new market is also a great chal-lenge for the Polish fish processing indus-try.

THE POLISH MARKET

Traditionally, fish is quite important for thePoles, but it is expensive compared tomeat, so many cannot afford it veryoften. Due to the large and importantagricultural sector in Poland, meat alsohas stronger traditions in the Polish diet.The most common kind of fish is herring,which is one of the cheapest fish, andmost people can afford it. A study carriedout by The Sea Fisheries Institute foundthat 66 per cent of Poles buy herringregularly. Second in rank is cod and thethird is mackerel consumed by 44 percent of respondents. Smoked fish, mostlymackerel, canned products, fish fillets(cod-, pollock- and hake- fillets) are themost popular products in Poland.Because of the high prices, salmon is aluxurious product, and is not eaten regu-larly by Poles. On average, each individu-al consumed close to 6.2 kg fish in 1998,compared to a European average ofabout 12 kg. The average monthly expen-ditures of households when it comes tofish were PLN 4.89 in 2000 [GUS]. This indi-cates that many cannot afford any fishbut herring.

Both frozen fish and fish products arecommon on the market, but the sale ofmore expensive fresh fish is also increa-sing. The reason for this may be that thePolish standard of living is improving. Agrowing young middle-class with "wes-tern" preferences is also starting to appre-ciate the health-aspects of eating fish asan alternative to meat. When peoplebecome wealthier they tend to starteating more expensive sorts of fish like sal-mon, and eat less pelagic fish like herringand mackerel. An investigation from IrishSea Fisheries Board (BIM) says that this islikely to happen in Poland when the eco-

nomic situation gradually improves. [TLEFF]. This will hopefully mean new oppor-tunities for other seafood products, howe-ver, since there are strong traditions asso-ciated to herring and mackerel, the pro-spects of such a development is uncer-tain. There are also regional differences inpreferences. For example does herringobtain greater market shares in areasaround Warsaw, Gdansk and Szczecin.

Since fish is more expensive than meat inPoland, an increased standard of livingand more European life style might incre-ase the Poles’ fish consumption. TheNorwegian Seafood Export Council (EFF) istargeting their sales-campaigns primarilyat women between 25-50 years with hig-her education who are living in cities, aconsumer-group with increasing purcha-sing power. The growing importance ofnew consumer markets, like super- andhypermarkets, has also contributed tomake the seafood products more avai-lable.

Sales of fish differ with the time of theyear. Especially right before Christmas thesale is high. On Christmas Eve, Catholicsare not allowed to eat meat, and themost people eat carp that day. OnFridays, Catholics do not eat meat,making the opportunity for the fish marketgreater.

NORWEGIAN EXPORTCHARACTERISTICS

EXPORTERS, TRANSPORT ANDIMPORTERS

Several large Norwegian export compani-es are operating on the Polish market,buying fish from Norwegianwholesalers/ports and selling through dif-ferent channels in Poland. Mainly frozenpelagic fish is exported. As Norway is the

Fish Exports and Industry

71

dominant supplier to the Polish fish mar-ket, covering about 60 per cent of thedemand [NTC], these exporters enjoy highvisibility and being “unavoidable” in themarket. With exception of some salmonbeing trucked, reefers mainly carry outthe freight of the fish from Norway toPoland and one big company, GreenReefers, dominates this market. Most ofthe fish is landed in Odraport, a duty-free-zone situated on the German border inthe north. Polish importers then transportthe fish either to wholesalers, to proces-sing companies or direct to the market.Forwarding agents mainly carry out thetransport, but some of the fish-processingcompanies also use their own trucks forpart of the transport.

As the market and connections betweenNorway and Poland are well functioning,and a sort of mutual dependency can beseen (especially with regard to herring),International Business considers that theexport of Norwegian fish seems to have astrong future in Poland. Three main factorswill have a large influence on this: •The Polish economy and the income development for Polish families in relationto the Norwegian fish prices (the Polishmarket is very price sensitive).•Possible EU taxes on Norwegian fish incase of a Polish EU membership. Thiscould mean a 15-20 per cent price incre-ase on the Polish market, which could befatal for the growth in demand.•Norwegian fish supply. Low fish-quotasdecreases supply, making the prices rise.This has large impact on the Polishdemand.

Other important suppliers to the Polish fishmarket are Iceland, Canada and the EUstates Denmark, England, Ireland andScotland. Even though they offer lowerprices, they will most likely not be able toforce the Norwegian fish out of the mar-ket, as they are incapable of deliveringsufficient quantity.

NORWEGIAN FISH EXPORTEDIn 2001, the total value of fish exportedfrom Norway to Poland was NOK 1 193 bil-lion, which compared to the 2000 exportis an increase of 28.5 per cent (see FigureFish 1). In 1999 the equivalent value wasNOK 792 million, thus in two years a 50 percent increase has taken place. However,when considering the quantity of fishexported, the picture is different. In 2001 a

total of 128 581 tonnes were exported, adecrease of about 16 per cent from theprevious year. These numbers show thegreat increase in prices for Norwegian fish(mainly herring) and the consequencesthis has for the Polish demand. A greatincrease in export cannot be expected inthe near future as the Polish economicgrowth is losing velocity, and the pricesfor Norwegian fish are increasing. In 2000, 37 per cent of the total fishimports to Poland were frozen fish fillets,and 70 per cent of this originated inNorway [NTC]. The Norwegian SeafoodExport Council (EFF) has had an extensivecampaign running in different media

through the last year, aiming at increasingthe general knowledge and interest for allkinds of Norwegian fish. NOK 35.3 millionwill be used in this campaign. [TD EFF]

HERRINGHerring is the most important fish importedto Poland, as it has strong traditionsamong the Poles. On the Polish market,herring is sold mainly as canned fillets indifferent kinds of sauces and oils. Fromsupplying 75 per cent of the demand in1996, Norwegian exports in 2000 covered83 per cent [EFF]. About 70 per cent ofthis is frozen fillets. The export value ofNorwegian herring in 2001 was NOK 662million, compared to NOK 446 million in2000. This makes Poland the second-mostimportant market for herring next toRussia. Considering the quantity exported,one easily understands the reason for thislarge increase in value: In 2000 approxi-mately 100 000 tonnes of herring wasexported. In 2001 the number had drop-ped to 75 000 tonnes. Thus, the very highprices led to a 25 per cent decrease,accounting for nearly all the drop in totalfish-export quantity.

OTHER WHITE FISH AND PELAGICFISHPoland is the second-largest single mar-ket, after Japan, for Norwegian mackerel.About 34 000 tonnes was exported in

Exports by totals

Source:EFF

Figure: Fish 1

72

2001, an increase from the two previousyears. In 2001 the export value was NOK267 million [EFF]. From 1996 to 2000 theshare of Norwegian mackerel in Polishimports increased from 39 to 84 per cent.[NTC] Mackerel is also sold mainly can-ned/ in jars with sauces and oils, andvegetables.

Cod is quite popular in Poland, and ismainly supplied domestically from theBaltic Sea, but also some is imported. TheBaltic cod is mainly fished in July – August,when it is peeks quality. Approximately363 tonnes of Norwegian cod was expor-ted to Poland in 2001 (NOK 7.67 million).At the moment the cod seems to be tooexpensive to experience high growth inthe near future.

Third in rank of pelagic fishes (by quantity)imported from Norway is capelin, butmore expensive fishes like Greenland hali-but and coalfish account for higher valu-es (see Figure Fish 2). Sprat is the mostcommon fish in the Baltic Sea, and it ispopular in Poland, but the Norwegianexport is not of great importance.

SALMONBeing a very expensive fish for the pricesensitive Polish consumers, salmon has still

not reached high sales quantities inPoland. Salmon has only been introducedto the market the last 3-4 years. In 2000the value of Norwegian salmon exportedto Poland was NOK 112 million. In 2001 thishad increased to nearly 150 million. It canbe found in nearly every restaurant andon the dinner tables in upper-classhomes, indicating a trend of increasedconsumption. Trying to introduce such a

luxury product to the Polish market, needsgood knowledge of the market-preferen-ces. Smoked salmon, vacuum-packed inpackage of small portions, is commonand popular with the costumers. You willalso find examples of salmon preparedwith oil in jars.

OTHER SPECIES/ SEAFOODTuna, carp, flounder and bream are otherpopular fishes at the Polish market, andproducts of these fishes are offered byseveral of the fish processing companies.The Norwegian Seafood Export Councilhas put through a campaign promotingNorwegian shrimps. Poles are learning tolike frutti-de-mare.

CONSEQUENCES OF A FUTUREEU-MEMBERSHIP FORNORWEGIAN FISH EXPORTERSFrom 1993, Norwegian fish and seafoodexports enjoyed free entry to the Polishmarket, as a result of the EFTA agreement.Without this free trade agreement,Norwegian fish and especially pelagic fishwould not have had the dominant mar-ket share it has today. When Polandenters the EU, the EFTA free trade agree-ment will be replaced with the regulationsand import taxes of the EU. Frozen mac-kerel and herring are, as mentionedabove, the most important products forNorwegian export to Poland. Whenexporting frozen mackerel and herring tothe EU, Norwegian exporters meet importtaxes between 15- 20 per cent, (apartfrom the period between 15 March and15 June when there is no tax for theseproducts) [EFF]. If Norway is not compen-sated for the rise in import taxes followinga Polish EU membership, it will worsen itscompetitive ability and probably lead toreduced volume or increased prices[NUPI]. However according to the rules ofthe World Trade Organization, the enlar-gement of an economic community likethe EU should not make a third countrymeet higher average taxes than before.When Sweden, Finland and Austria joinedthe EU in 1995, tax-free quotas compen-sated Norway. Because of the bureaucra-cy and reduced potential for increasedexport, this is not an optimal solution.Probably the most profitable thing forNorwegian exporters would be a generaltax reduction. As shown in the Table Fish3, this will lead to reduce import tax on all

Fish exports and industry

Norwegian export to Poland 2001

Source:EFF

Figure: Fish 2

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73

pelagic species. This regime will not havethe negative consequences for expansi-on of market share that a tax-free quotasystem will have. According to ArneMelchoir, “It will be surprising if Norway willnot achieve a compensation agreementfor the fishery sector”[NUPI]. The extentand quality of this agreement is depen-dent on negations between Norway andthe EU. Another consequence of the EU enlarge-ment is that the EU member states will getfree access to the Polish market. ForNorwegian exporters this means an evenworsened competitive situation, as thedifference in import taxes and restrictionsincrease.

Even though Poland is a very price sensiti-ve market, it is not certain that importtaxes will increase the EU countries’ mar-ket share at the expense of Norway.Norwegian herring, the most economical-ly important species, is preferred to mostof the herring from both the Baltic Seaand the EU countries. The reason is thatNorwegian herring is considered to be ofthe highest quality because of its size. It isuncertain if the Polish processing industryis able to convert its production to matchherring of a different quality. A develop-ment backing up this argument is thateven after a period of increased price,the demand for Norwegian herring didnot decrease. [TL EFF]

Norwegian herring has a competitiveadvantage also when it comes to quanti-ty. Most likely the EU countries will not beable to export the amount of herringdemanded by the Polish market. The EUcountries’ catch of herring has beenstable during the last years and due tolimited quotas it is not expected to incre-ase.

Future EU Membership will probably acce-lerate Poland’s economy and raise thestandard of living. This might compensatethe raise in price due to the import taxes.On the other hand an increased standardof living might change fish consumption.

THE FISH PROCESSING INDUSTRYMARKET STRUCTURE

Fish processing and preserving in Poland isdealt with by about 380 enterprises.About 80 per cent of them are small,employing less than 50 people. Currently,

there are only four state-owned fish pro-cessing- enterprises. 160 of the companiesproduce end products. The largest com-panies conducting fish processing activiti-

Figure: Fish 3

74

es are: Superfish S.A in Kukinia, Big Fish inGniewino, Lisner in Poznan, Euro- Odra inSwinoujscie and Wilbo Sea Food S.A inWladyslawowo. A great share of the com-panies are located in the coastal regionsin the north. The reason for this localizati-on has historical aspects, but today thereare no obstacles to localization in otherregions.

The whole industry is going through signifi-cant changes, which are mostly forcedby new standards the EU will demand,such as good manufacturing practiceand Hazard Analysis Critical Control Points(HACCP). 44 of the companies’ meet theEU standards and another 21 have anopportunity to live up to stated require-ments. As a consequence it is expectedthat enterprises manufacturing low qualityproducts will be eliminated from the mar-ket. In a few years, 3-4 of the largest com-panies will control about 80 per cent ofthe market opposed to today’s 60 percent[MPW]. In the fish processing industrywe find significant differences in the stan-dard concerning production facilities,and also cooling-, freezing- and purificati-on plants. Investments in these areas areneeded as a consequence of thecoming EU demands.

PRODUCTION AND SALESIn the processing industry we find a widelyspectre of products. The most popularfish, such as herring, mackerel and spratare prepared in different types of saucesand delivered either in tins or jars. Butthere is an expected drop in the numberof canned fish producers because of thedifficult period in Polish economy. Alsocommon products are fish salad withmayonnaise in different kinds of flavour.Different companies have an assortmentof about 140. These products are distribu-ted all over Poland, with a few regionaldifferences to consider. Annual fish pro-cessing production amounts to 100 000tonnes of frozen fish, 15 000 – 16 000 ton-nes of chilled fish and 50 000 tonnes ofmarinades [PAIZ].

There is a large sales organization inPoland, which is now developing expo-nentially. New, demanding sales-channelshave changed the market-access for fish-products in recent years, like all otherconsumer products. Large, internationalhyper- and supermarket-chains are takingover the market, introducing new

demands on the processing companies:Marketing, sales-forces and relation-buil-ding with these chains. This imposes theneed for further investments, which not allcompanies can afford. Due to their size,the chains are very powerful and canalso operate with binding agreements ondeliveries placing all the risks on the pro-cessing company.

An important customer for the Polish fishproducts, especially for cheaper goodssuch as canned and salted fish, is theEastern European market. Lately Russianand Ukraine demand has increased nota-bly. But the EU (mainly Germany andEngland) markets also have a strong posi-tion as a major consumer of fish exportedor re-exported from Poland. In 1999 the EUcountries imported 89 000 tonnes of fishproducts from Poland. Several of the pro-cessing companies in Poland are workinghard to get access to this market, as it willbe easier to operate when Poland entersthe EU. Having established themeselves

before accession to the Union, compani-es hope to gain competitive advantages.This is also a market of higher purchasing

Fish exports and industry

Polfish

Every second year this internationalfair for fish products is held in Gdansk.In 2001, about 200 exhibitors from 13countries were represented, themajority being Polish fish processors.This fair strives to enhance contactwtih businesses with regard to allparts of the fish industry; processing-and technology companies, aqua-culture and environmental protectionthemes and so on and so forth. The7th Polfish fair will be held in June2003, and the NorwegianAmbassador has stated the importan-ce of this industry for the Polish-Norwegian relationships by confir-ming that he will attend.

For further information:

www.polfish.nets.plwww.mtgsa.com.plTelephone + 48 58 5549206

+ 48 58 5549344fax + 48 58 5522168

International Business

75

power, enabling sales of a greater varietyof products.

THE NORWEGIAN ROLEImported fish plays an important role as asource of raw material for Polish proces-sors. Lately some disappointment aboutNorwegian exporters has been expressed.This is mainly due to the reductions in fis-hing quotas in Norway, which togetherwith increased demands for fish in Russiaand the Ukraine caused a great increaseof prices. As the processing companieshad binding agreements with the super-market chains, an increase in prices of120- 150 per cent caused them great los-ses. [NTC]

The fish processing industry is open forforeign investments in their market, and ofcourse also for Norwegian investments.This is an opportunity for Norwegian com-panies to get a position inside theEuropean Union. Two of the main fish pro-cessing companies have Norwegianowners, Big Fish is owned by Rieber andSon and Super Fish owned by Orkla Foodsthrough Abba Seafood.

DOMESTIC PRODUCTION

From the perspective of the national eco-nomy, the fishing industry is of marginalimportance and counts for only about0.03 per cent of the Polish GDP. Howeverit makes a significant contribution to thelocal economy in the coastal regions.These regions suffer structural unemploy-ment; hence fishery and associated acti-vities are important for the inhabitants.The local fisheries is not that crucial to thePolish processing industry, which dependson import. This is the reason why Poland isa net importer of fish. [FAO]

The Polish fishery industry can be dividedinto three sectors. First there is boat fisherythat can be considered as a local artisanfishery. The second is cutter fishery, opera-ting mainly in the Baltic Sea. The last sec-

tor is the deep-water fleet, suffering fromreduced quotas in the fishing grounds ofthe northeast Pacific and structural pro-blems. It is likely that the fishery industrywill experience a decrease since theBaltic Sea has been over-fished for awhile. Reduced quotas are particularlyexpected for cod, which is the species ofgreatest economic importance. Anotherproblem is the state of the fleet. The PolishBaltic fleet has an average age of about30 years, and a significant part of the ves-sels need capital investment in order tomeet the EU's sanitary, safety and surveil-lance requirements. [FAO] There is some fish farming in Poland, butonly in rivers. Trout and Carp are the spe-cies that are most commonly bred. Dueto poor conditions in the rivers and theBaltic Sea and the additional pollutionthe fish farming carries, InternationalBusiness has found that there is no poten-tial in fish farming in Poland.

Figure: Fish 4

76

Fish exports and industry

References:

[EFF TD]Tom Fredrik Dahl, Norwegian SeafoodExport council, "Rekordstor interessefor det polske sjømatmarkedet" [Online]URL:<http://www.seafood.no/Eff/eff-news.nsf [Cited January 2002]

[NUPI] Arne Melchoir, Norsk utenriks politiskinstitutt, “EUs utvidelse mot øst: Etspørsmål om sild og makrell” Notesfrom the seminar ”Pelagiske dager”august 2000

[EFF TL] Trine Lydersen, Norwegian SeafoodExport council, “Norsk sildeeksport tilPolen og andre østeuropeiske landved EUs utvidelse”, August 2000

[EFF] Norwegian Seafood Export council,”Tolltariff til EU 2002”

[FAO] Food and Agriculture Organization ofthe United Nations, FisheriesDepartment, [Online],URL:<http://www.fao.org>[CitedJanuary 2002]

[GUS] Statistical yearbook of Poland 2001

[CESTAT]Central Statistical Office of Poland2001 [Online]<http://www.sigov.si/zrs/eng/cestat/c

estat21.pdf > [Cited February 2002]

[PAIZ]Polish Agency For ForeignInvestments, The Polish Food Industry,2001

[NTC]Meeting with Alexandra Buczkowskaand Hege Håland at the NorwegianTrade Council, Warsaw, 8 January2002

[MPW]Maciej Piowski, WILBO, meeting 17January 2002

Seminar notes, Norwegian SeafoodExport Council, "Pelagiske dager2001", August 2001

The Warsaw Voice, no. 62, December16, 2001[Online] URL:< http://www.warsawvoi-ce.pl/v689/index.html [Cited February2002]

"Norway in Poland", NationalSupplement to The Warsaw Voice, no62, December 16, 2001

Consequences of future accession toEU for Polish trade and fish processingindustry

Meetings with the Norwegian RoyalAmbassador Sten Lundbo, Contimax,Wilbo, Bigfish, Odraport, NomadicShipping December 2001 andJanuary 2002

77

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Cargo Valves

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OBJECTIVE

Segel‘s objective is to improve the competiti-veness of its clients by increasing the client‘sknowledge within internationalisation, strategy andmarket development.

PARTNERS

Trond Haavik, Managing Director, Segel AS• 3 years work experience from several

European countries.• 8 years experience as business adviser with main focus on internationalisation.•Certified export consultant by Norwegian Trade Council

Roger Bergset, Senior business adviser• 5 years experience from bank development projects• 5 years experience as general manager• 10 years experience as business adviser with main focus on business development

Synnove Aabrekk Natland, Business adviser• 5 years experience from development of tourism projects• 1 year experience from export of fish products• 6 years experience as business adviser with main focus on market development.

Astrid Paulsen, Business adviser• 6 years experience as sales manager in IT and graphical sector companies• 8 years experience as market manager and personnel manager in energy sector companies.• 1 year experience as business adviser with main focus on business development

.Kaare Nordbø, Business adviser and GeneralManager, Segel Polska Sp. z o.o.

• 4 years experience from innovation and market development in maritime and offshore sectors•6 years experience as general manager in Norwegian owned companies in Poland• 1 year experience as business adviser with main focus on Segel‘s Polish operation.

QUALIFICATIONS

The partners are highly qualified professionals withexperience from

• general management• project management• human resources management• marketing• internationalisation• financing• engineering

BUSINESS SECTORS

The main seat of Segel is located in Nordfjordeid onthe Western coast of Norway, which secures close con-tact with the following business sectors:

• fishing• energy• furniture• building materials• metal producing and mechanical• maritime and offshore• tourism

METHODS

Strategy Process (Styrt Strat)presented and implemented in a number of Norwegiansmall and medium-sized companies over the past 5years. Styrt Strat is based on Igor Ansoff‘s method andPorter‘s 5 forces, and is taking into account the limitedtime that senior executives have available for strategicprocesses.

Segel Intelligence Programme© (SIP)developed by Segel based on the clients need for orga-nising information so that the employees receive theright information at the right time.

Project Management Process (PLP)a systematic approach for successful definition, plan-ning and realisation of projects.

80

The shipbuilding industry has long traditi-ons in Poland, and a very good reputati-on. As the industry was the first in Polandto enter the international market, goodconnections have been built up over theyears. Polish shipyards build more than 30ships per year worth approximately USD16 billion, which is about 3 per cent of theworld production. Two major shipyardsdominate the market, and play veryimportant roles for the cities where theyare located. The threats one fears arecompetition from low-cost countries andthe consequences of an over valuatedPLN.

AN IMPORTANT INDUSTRYThe main regions for Polish shipyards arethe ”Tri-City” (Gdansk, Gdynia and Sopot)and the Sczcecin area. There are somesmall shipyards situated on the coastline

between these cities, and the suppliersare located in all parts of Poland. Stillthere is no doubt that the areas mentio-ned host most of the activity. BothSczcecin and Gdansk have technical uni-versities with marine departments. Eachyear they graduate 150 – 200 engineers[DNV]. This illustrates the importance ship-building has for these cities. The industry isalso of great importance for the Polisheconomy as a whole; about 27 per centof Poland's exports are related to thisindustry [EMB].

According to the Organization forEconomic Cooperation andDevelopment (OECD), Poland delivered34 ships worth USD 820 million in 2000.During 2000, 67 new orders came in.These figures indicate good long-term

prospects. However the prospects are notthat bright for the employees in the shipy-ards. From 1996 to 1999 employmentdropped from 47 752 to 42 466, and sincethen even more have been laid off. Theseemployees became redundant after amajor restructuring, which still is not finis-hed. The cutbacks are mainly in adminis-trative positions, while production positi-ons are rising. Despite these reductions inemployment, the shipyards are veryimportant in the costal regions and sup-port from 130 000 to 140 000 jobs in theyards and related industries. [WBJ]

SHIPYARDSMARKET STRUCTUREFollowing the privatization that took placefrom 1995 to 2001, there has been a con-solidation among the shipyards, particu-larly in the shipbuilding industry wheregroups of shipyards account for 97 percent of the market. Gdynia ShipyardGroup is the largest and most prospectiveshipbuilder in Poland, and the fifth largestin the world. It has a capacity of 20 – 25vessels a year [DNV]. The Gdynia ShipyardGroup now owns the historical importantGdansk Shipyard, where former PresidentLec Walesa once was employed. Theother major shipbuilder is SczcecinShipyard. This shipyard was the first to beprivatised in ´95/´96. Gdynia ShipyardGroup is larger than Sczcecin Shipyardboth with regard to turnover and numberof vessels produced, but still the SczcecinShipyard plays a major role the in Polishshipbuilding industry.

Polish repair yards are much more diversi-fied then the new-building part of theindustry. There are various small andmedium-sized shipyards that operatemainly on the European market. Theyhave recently achieved relatively goodbusiness performance, with an averagenet profitability that amounts to nearly 5per cent [BALTEXPO].

CHARACTERISTICS OF POLISH SHI-PYARDS The Polish shipyards are known for theirhigh-quality work in the international ship-ping industry. The mechanical aspectenjoys a particularly good reputation,and together with low labour costs this istheir major competitive advantage. Astrong history in steelworks is probably themain reason for the high quality welding

Shipbuilding

81

and hull-work. The good conditions in theglobal shipping industry during thesecond half of the 1990s made it possiblefor the shipyards to conduct internalrestructuring processes. Thus the producti-on facilities have improved considerably.

Container ships are the main types of ves-sels built in Poland, but the yards are veryflexible and can construct ships to mostrequirements. Typically Polish shipyardsare not building cruisers, military vesselsand other more complicated ships, asthese require more advanced technolo-gy. The two major shipyards have thecapacity of constructing ships up toabout 270 m long and 45 m wide, andwith sizes up to 100 000 DWT (deadweighttonnes). In 2001 the Szczecin Shipyarddelivered the world's largest ship in stain-less steel. This 40 000 DWT chemical tankerin a way symbolises the prosperity of thePolish shipyards.

As well as delivering high-quality newships, the Polish shipyards are also goodat reparir work and rebuilding. Poland isnumber one on the European repair-mar-ket. A large share is passenger-ferryrepairs, but some work has also beendone for the offshore industry, where thePoles are building up competence. Thedominant Gdansk Repair yard, with acapacity of 100 000 DWT, is said to be thebest in Europe, but also the smaller repairyards deliver very high quality. [DNV]

In this industry international relations havealways been important (even before1989), and the business culture in Polishshipbuilding has developed to be quiteEuropean. One will find an extensiveusage of modern communications-tech-nology, for instance electronic drawingsare being sent by e-mail. The majority of

Polish shipyards are ISO certified, as this isrequired by most buyers. All in all this ena-bles cooperation when operating in thismarket. However, one should do extensi-ve research on the market before ente-ring it, especially due to the many shipy-ards around. Many have also experien-ced the importance of having "hands-on

contact" while the work is being done.One should not expect that everythingruns smoothly without being followed up.[KN]

Major competitive advantages [DNV]:•Quality. Especially in the steelworks•Geographical location. A market con-centration to the German andScandinavian markets•Time accuracy. The Polish yards haveimproved a lot at this area •High quality staff. Good educationalinstitutions and high loyalty to the employ-er•Good design to requirements

Normally contracts with Polish shipyardsare signed in USD. As the PLN has beenover-valuated during the last couple ofyears, this has led to great profit losses inthe industry. Many shipyards are opera-ting with very narrow profit margins, downto only a few percent. [UNITOR]

Another problem in the industry is the lowlevel of investment. New capital is especi-ally needed for further restructuring: A lotof the facilities on the shipyards are get-ting old and have to be replaced.

TRENDS IN THE INDUSTRYCompared with their major competitors,the Polish shipyards are becoming relati-vely expensive. When it comes to newbuilding, this causes great concernamong the Polish shipyards, as Asiancompetitors are basically selling at dum-ping-prices [UNITOR]. The business of

Figure: Ship 1

82

repairing ships is more sensitive to conditi-ons in closer markets, like the Baltic States,Russia and Romania. Travelling to the FarEast to repair ships is far too expensive,thus factors like quality and price fromnearby shipyards represent the competiti-on. The main reason for rising prices isincreasing labour costs. Wages in thePolish shipbuilding industry are howevernot expected to rise significantly in thenear future, due to the high unemploy-ment levels. Entering the EU, Poland willhopefully see a general increase inwages, which on a long-term basis willinfluence this industry as well as any other.Another reason for the relatively high pri-ces is that the Polish shipyards are notsubzidised by the government, whereas inother countries one can find such supportat levels up to 20 per cent.

The same environmental demands as inthe EU are restricting Polish industry. Still,due to low penalties, these might not befollowed up100 per cent, and Poland the-refore experiences a cost advantage toNorway and the EU [UNITOR]. As thecountry enters the EU this is likely tochange, and the advantage might belost to Russia, Romania and other compe-titors.

Because of the price advantage that willslowly disappear, Polish shipyards will findit very important to restructure to gain abetter position in the market. Some aredoing this by specializing in niches. Otherstry to optimize their capacity, by forinstance building for the offshore industry.By doing this they are not as dependenton seasons and are not as restricted bythe number of docks available.

OFFSHORE DELIVERIESThe high-quality steelworks have givenPoland a good base for deliveries to theoffshore industry. As mentioned above,some shipyards are delivering modulesand sections for platforms and decks inaddition to building and repairing ships.Some steel construction companies arealso diversificating their order-portfolioadding offshore deliveries. MostostalGdansk being one of them, presently wor-king on the Kvitebjørn project for ABBOffshore Systems AS. The Poles have thecompetence to make most constructionsrequired, the main problem is to transportbig units over great distances at sea. Lowprices are a very important factor when

the Polish companies are preferred forthese jobs, but the quality is considered tobe equally as good as any other. [ABB]

SUPPLIES TO POLISH SHIPYARDS

Being the Polish industry with the longesthistory on the international market, theshipyards in Poland are not only used toserve customers from all over the world,they are also familiar with purchasing shi-p’s equipment from other countries thantheir own. Poland has a few suppliers fortheir shipyards, which the shipyards oftenprefer to use when no other is specifiedby the owner of a ship being built orrepaired. The Polish suppliers can delivermachinery and mechanical equipmentfor ships. These products are consideredto be of acceptable quality. There arealso a few suppliers of electrical systemsfor ships. Most of the ship’s equipment

Shipbuilding

Baltexpo

The Baltexpo is held every secondyear in Gdansk. In September 2002the 11th fair expects some 20 000 visi-tors from more than 20 countries. Thetotal number of exhibitors has beenclose to 500 in recent years, whereabout 50 per cent are Polish. All sortsof companies connected to maritimeindustry are represented.

The objectives of Baltexpo are:•To establish contacts between fore-ign exporters and Polish buyers andend-users•To create: • an East-West forum in marine eco-nomy• a meeting ground for discussionconcerning industrial cooperationwith Polish manufacturers• a meeting ground with prospectivebuyers From East European countries.The exhibition is organized primarilyfor trade and technical circles

Contact information:Agpol Promotion Ltd.,00-654 Warszawa,17 _niadeckich Streetphone.: (+48 22) 627 20 89/ 627 20 90,fax: (+48 22) 625 23 98e-mail: agpol@pol.plURL: http://www.baltexpo.com.pl

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used in Polish shipyards comes from fore-ign actors, Germany and Scandinaviabeing the main suppliers.

MARKET OPPORTUNITIES ON THESHIP’S EQUIPMENT MARKETAs a starting point, all Norwegian suppliersfor the ship’s equipment market can selltheir products to Polish shipyards. Thesupplier who can deliver a product withsatisfactory quality to the lowest price willbe chosen. When asked, managers atPolish shipyards say they associateNorway with high knowledge on techno-logy and “know how”. Most of the mana-gers also tell us that there is a lack ofdomestic suppliers of high-tech electro-nics and advanced machinery.

Polish shipyards cannot compete on pri-ces as they have done earlier years. TheBaltic, Romanian and the Asian marketare usually better considering the priceaspect. Because of this, the shipyardsfocus more on quality and on-time delive-ries. This may require fast deliveries fromthe supplier and many suppliers mayhave an advantage if they are located inone of the towns with the largest shipy-ards. A local office in Poland could alsobe strategic important because of the

central location with the markets inGermany, Russia, Ukraine and Romaniaas well.

HOW TO ENTER THE MARKET

Maybe the best way for Norwegian com-panies to enter the Polish market is to sellthe product to Norwegian shipowners.That way the owner can specify the pro-duct in the specification for the shipbeing built.

It is also worth trying to advertise in one ofthe Polish or international shipbuildingmagazines and try to sell equipmentdirectly to the yards, or you can gothrough one of the many agents locatedin Norway. One trend though, amongsmaller companies, is cooperation betwe-en several other companies to form largerunits that can deliver a larger product, orpackage that is easier to sell.

Norwegian Maritime Exporters(NME)

NME is one of the world's leadingassociations of marine equipmentsuppliers. The association has over140 major Norwegian manufacturerswho hold an 8-10 per cent internatio-nal market share in the marine equip-ment industry.

NME is divided into three areas ofcompetence:-Ship Equipment (NME/S)-Fish Equipment (NME/S)-Aquaculture Technology (NME/A)

NME strives to build and operate net-works that contribute to greaterexpertise in the areas that are rele-vant to customers and suppliers, hel-ping them to assess market opportu-nities and enhance their ability tocompete in the global market.

Contact information:Norske Maritime Eksportører

Postboks 1927 VikaNO-0125 OsloTelephone: +47 22 01 06 61Fax: +47 22 01 22 02

84

Shipbuilding

References

[WBJ] Warsaw Business Journal, JeffreySparshott, “Sea Change”, 17September 2001URL:<http://www.wbj.pl/user/index.asp>

[DNV]Country Manager Knut Solberg, DetNorske Veritas, meeting 17 January2002URL: <http://www.dnv.com>

[GUS]Central Statistical Office, "PolishMaritime Economy 2000", Szczecin,June 2001

[EMB]Royal Norwegian Ambassador StenLundbo, Warsaw, meeting 4 Januar2002

[ABB]Tom Janson, ABB site representative,

Mostostal Gdansk, meeting 15January 2002

[UNITOR]Andrzej Mlodkowski, technicalProcess Co-ordinator, UNITOR,Szczecin, meeting 16 January 2002

[BALTEXPO][Online] URL: <http://www.baltexpo.com.pl>[Cited February 2002]

[KN]Kåre Nordbø, Selgel, meetingsJanuary 2002URL: <http://www.segel.no>

Norwegian Consul in Szczecin,JanKubiak, meeting 14 January 2002

Jaroslaw Stepien, CommercialManager Morska StoczniaRemontowa, meeting 15 January2002

85

86

Poland is a considerable consumer mar-ket with the largest population in CentralEurope. The country is a perfect locationfor a company planning future expansionto the markets of the Baltic States or tothe eastern markets. Household incomesare increasing, and new products, inn-ovations and the so-called “western” lifes-tyle are being adapted by a growingnumber of Polish consumers.

CONSUMER

During the Communist era, Polish consu-mers were used to markets with a poorselection of products. Within only a fewyears, after 1989, the consumer markethas exploded. The Polish consumers havenow the opportunity to choose betweenall sorts of goods. They may buy whatthey wish according to their requiredprice and quality.

PRICE AND BRAND NAMEThe purchase of a product is determinedby two factors: Price and the brandname. For young people, price is not themost important criteria when selectingbetween products. They are influencedby fashion and advertising, and requirewhat is hip and popular. The older gene-ration are more traditional and preferwell-known and tested products in theirpurchasing. Polish consumers are quicklyadapting to innovations, new productsand are uncritically accepting of theAmerican or so-called “western” lifestyle.[PAIZ]

INCOMEIt is important to note that even thoughhousehold incomes in Poland may appe-ar low compared to Western Europe,people are better off relatively speaking,as general expenses are lower. Incomes inthe cities are considerably higher, and inthe countryside, income figures are distor-ted by the fact that many people stillown smallholdings, so their expenses onitems like food are to a large extent redu-ced compared to densely populatedurban countries like Britain.

The average income for a Polish worker isabout PLN 2150 per month. This indicatesthat most people do not have any choi-ce but to buy cheap products. Food isgiven high preference, and during specialholidays like Christmas it is not unusual to

spend almost 100 per cent of income onfood. At these times, even though theyhave many other expenses, people tendnot to look at the price so much but thinkmore about enjoying their meals andspending time together with their families.[PAIZ]

COUNTRY OF ORIGIN EFFECTSA few years ago, any product was prefer-red to domestic products, simply becausethe Polish consumer had been deniedaccess to imported goods for so long. Thiscuriosity then declined somewhat: ManyPolish consumers were sceptical to fore-ign investors and foreign products. Theiropinion was that foreigners came toPoland only to make money, and theconsumer nationalism grew quite strong.Now the situation has changed and con-sumer preferences according to countryof origin depend more on type of pro-duct. Food and alcohol products are usu-ally domestic. Though 20 per cent of Poleslike imported food items, 30 per cent pre-fer domestic products. Young people upto 24 are the exception – one third of thisgroup like foreign food products. [PAIZ]

INFLUENCE OF CHILDRENOne of the key features of the Polish mar-ket is the size and influence of the young-er generation. Children up to the age of

15 make up to 21 per cent of the popula-tion. Over 57 per cent of children live incities where accesses to the market andpurchasing power are potentially higher[PAIZ]. As in the USA and Western Europe,children participate in the purchasingdecisions regarding goods for the wholefamily such as toothpaste, soap, sweets,

The Consumer Retail Market

Rather important

Not very important

Not important or not important at all

Figure: Consumer 1

87

cleaning products and beverages.Children have less influence on the pur-chasing decisions of their parents regar-ding other products.

CONSUMER SPENDING The structure of Polish consumer spendingis similar to that observed in WesternEurope. The percentage of income spenton food items is decreasing in favour ofother goods and services. Individual con-sumption expenditure has been risingevery year since 1993. Spending on interi-or decoration, health services and com-munication is growing especially fast. Thegrowth trend should continue until Polandreaches the level of consumption inWestern European countries.

MARKETING

A lot of the foreign retail companies orchains which have became established

in Poland started ambitiously with manymarketing-tricks on the radio, televisionand so on to get a considerable share ofawareness in the Poles' minds. Today tele-vision often is looked at as a very effecti-ve marketing tool, and radio is growing inpopularity as an advertising medium.

ADVERTISINGAdvertising is considered to be one of thebest investments in Poland. Polish adverti-sing revenues reached almost USD 1.6 bil-lion in 1999 (about five per cent of theEuropean market), and the spending onadvertising is growing rapidly (for instan-ce, it was 26 per cent higher in 1999 thanin 1998). The most advertised brands in1998 were Danone, Coca-Cola, Blend AMed, Vizir, Pampers, Always andKnorr[PAIZ]. As much as 58 per cent ofadvertising budgets are spent on televisi-on campaigns, making it the most popu-lar means of advertising. It is also showinghuge growth.Most consumers have a positive attitudetowards advertising. Education, incomelevel and age play a central role in theinfluence of advertising on Poles. Lesseducated and older consumers withlower incomes are more convinced byrational arguments in advertising. Whilethe emotional and informational element,plus the context of advertising, is moreessential for the younger consumers withhigher education and income. Youngpeople pay more attention to advertisingthan older Poles.

KEY FACTORS FOR THE MARKETINGSTABMarketing plays a central role for a com-pany trying to survive on a rough market.Without marketing budgets, for instance,a local producer has to choose betweentwo fates: 1) To be ousted by a competi-tor. 2) To be bought up by huge internati-onal companies that can handle theexpensive marketing and distributioncosts of the product [REM].

To be effective and get the requiredresults, a company should pay attentionto their marketing stab. Good salesmanagers and regional sellers are essenti-al, as well as having representatives fromthe company in the stores when the shel-ves get empty, to secure a visible placein the store for their products. Campaignsin different stores with personal presentati-on of the product including samples

Communications 3%

Personal Hygiene 3%

Food and Beverages 31%

Utility Bills 18%

Transportation 9 %

Culture and Entertainment 8%

Clothing and Shoes 6%

Health 4%

Other 18%

Figure: Consumer 2

The consumer retail market

88

should be a focus, and it is important tohave good connection with the forwar-ding agents truck drivers, who play a keyrole in getting the company’s product tothe right store at the right time.

The Scandinavian people and lifestyleenjoy positive associations for most Poles.This image could be focused on in themarketing campaigns of Norwegian com-panies and chains, through emphasisingthe Norwegian or Scandinavian aspectsof the products.

BRAND LOYALTY

Shopping has become a way of spendingfree time and a family activity in Poland.A special characteristic for women, butalso notable for men, is that significant

proportions of all purchases are madeduring various types of promotions. Ingeneral, promotions are an effective wayto reach the Polish consumers.

Despite the impact of promotions, 70 percent of the highly educated Poles meanthat a good brand name is an indicationof product quality. Polish consumers havein the recent years experienced a drama-tic increase in the number of brands.Poles are generally brand loyal; over 40per cent of the Polish consumers expressloyalty to a specific brand. The Polesname the following when it comes to bestbrands: Sony, Philips and Polar. [PAIZ] The chains own products; the privatelabel products, have lower prices andsometimes poorer quality than brandedproducts. As we know there are two mainfactors for the Poles in purchasing situati-on: brand name and price. From FigureConsumer 4 we can see that almost aquarter of the Polish consumers payattention to the producer and brandname in consumer decisions. Young,urban Poles tend to buy more brandedproducts than the older generations andyoungsters living in the rural areas. Peoplewith secondary education, blue-collarworkers, pensioners and women are moresensitive to price than the other consu-mers. Because the branded products ingeneral are among the more expensivechoices in each product category, theselast-mentioned consumers tend to pur-chase the less expensive, private labelproducts.

LOCALIZATION AND SHOPPING

In Poland many people live by the saying:“Never use the car to get bread”. This isone of the main reasons why there arevery many small local shops where peo-ple get the most needed products, likemilk, bread, coffee and butter. The selec-tion in these shops is not impressive com-pared to other shopping possibilities,often only two or three different kinds ofeach product. The advantage with thelocal shops is closeness, and often a morepersonal treatment of the customers thanin larger shops. Older people prefer eve-ryday shopping in local stores, where theycan get fresh bread at a short distance.Young people tend to do their shoppingin more sizeable shops, where they shopmore frozen food and ready-made

0 20 40 60 80 100

Price

Quality

Polish origin

Well known producer and brand

Environment friendlieness

Word of mouth

Packing

Other

Figure: Consumer 4

Radio

Outdoor

Daily Newspapers

Magazines

TV

Source:PAIZ

Figure: Consumer 3

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meals. This means that they can shop allthey need only once or twice a week.Purchases are made primarily in stores.Only about 10 per cent of adult Poles usemail order catalogues at the moment.During the last ten years the Polish markethas been invaded by foreign investors,especially from Germany and France,building hypermarkets. These are giganticshopping centres often build outside the

cities where parking facilities are good.Experts predict that there will be restricti-ons on where the hypermarkets could belocated [REM]. Because they take possibi-lities from other stores (local shops andsupermarkets) and companies in the cen-tre-zone, the hypermarkets presumablywill be banned from the city centres. Themain goal of the hypermarkets is to makeshopping a good experience, often sel-ling entertainments like bowling and cine-ma, along with the shopping. The selecti-ons of goods in the hypermarkets are verygood. It is possible to get all sorts of goodsat all kinds of different price- and qualitylevels.

DISTRIBUTION STRUCTUREDEVELOPMENTS IN THE 1990’S Investments in the distribution systemDuring the command economy in Polandprior to 1989, the existing distribution sys-tem was not governed by the principlesof efficiency and effectiveness, whichresulted in rather outdated wholesale andretail, formats. After the start of the mar-ketization process in 1989, the Polish distri-bution system had to undergo significantchanges. Due to its sheer size and deve-lopment potential, Poland did not haveproblems in attracting international invest-

ment into this sector of the economy. Thusthroughout the 1990’s the Polish markethas attracted a large number of internati-onal retail chains such as German Metro,French Casino, Auchan and many others.By the middle of the 1990s, these investorshave spent over USD 3 billion on thedevelopment of the distribution structurein Poland.

These investments have resulted in a num-ber of modern retail and wholesale for-mats such as hypermarkets, supermarkets,hard discount stores and cash and carryoutlets. For instance there are around 120foreign owned (i.e. excluding Polishowned) hypermarkets in the country. Thisnumber has been around 100 at the endof 2000 [CAL]. Hypermarkets in Polandhave an average of 8 000 -10 000 shop-pers daily per store, and average dailysales per hypermarket are USD 140 000 -170 000 [PAIZ].

Furthermore, there are currently twomajor processes under way in the Polishdistribution industry. First of all, the processof aggressive market entrance or furtherinvestments by international players is stillcontinuing. Second, there is a trend ofconsolidation between the domesticPolish players in order to resist such astrong foreign competition. It is worthwhileto note that aggressive tactics of a num-ber of international players have drawn acertain amount of criticism in Polish socie-ty. For example, Polish media has critici-zed foreign retail chains for destroyingPolish producers by pressuring them toproduce private labels cheaply, and thusdestroying Polish jobs. In addition some ofthese companies apparently have beencriticized for the violation of the Polishlabour laws. Needless to say this kind ofmedia coverage generates bad PR forthe international investors in this industry.

FRAGMENTED STRUCTUREDespite the massive inflow of investmentinto the distribution industry throughoutthe 90s, the process of restructuring is farfrom over. It is estimated that the modernretail formats (hypermarkets, supermar-kets, etc) account for merely 30 per centof the retail turnover [REM]. Here it isimportant to note that these calculationsmostly include the turnover of the FastMoving Consumer Goods (FMCG) seg-ment and the market share of themodern retail formats may vary depen-

90

ding on product category. The rest of theretail turnover is still controlled by the tra-ditional shops, and ”alternative channels”– kiosks, shops at petrol stations, bazaarsand so on. The share of the alternativechannels is estimated at 15 per cent[CAL]. Moreover it is important to empha-size the role of open markets andbazaars. Not only is this type of retail for-mat still significant is terms of turnover, butit is also deeply rooted in the purchasinghabits of many Poles who traditionally areused to doing a lot of shopping in theseplaces. In fact these shopping habits areso resistant to change, that the shareenjoyed by these outlets has not decrea-sed, while the share and number of tradi-tional shops has been, and still is, decrea-sing.

This kind of distribution structure implies avery fragmented retail market. There areover 400 000 shops in Poland, most sizedup to 100 square metres, with over 50 percent being less than 40 square metres[CAL]. Thus for every 10 000 inhabitants inPoland there are around 30 shops, com-pared to 18 in Hungary, 17 in Spain and 8in Germany.

Not only the retail distribution structure isfragmented in Poland, the same relatesto the wholesale distribution structure.There are a large number of wholesalersin the country and it is often the case thatmany of the companies are small andthey carry narrow assortments of productcategories. This is likely to pose problemsfor the distribution systems of the retailchains, resulting in a situation where theyhave to deal with a large number of sup-pliers and thus the turnover per wholesa-ler is low and costs are higher than neces-sary. Consequently, this kind of distributionsystem creates a good deal of inefficien-cy and unnecessary costs in the distributi-on channels.

DEVELOPMENT TRENDSThe statistics shown above once more illu-strate the potential that still remains in thePolish distribution industry. The share of themodern retail formats is expected to growto 45 per cent in 2003 from today’s 30 percent [CAL]. Thus a clear trend will begrowth in the number of modern retailoutlets and decrease in the number oftraditional outlets. The number of smallshops is already falling at the rate of 1-2per cent a year [CAL]. One can also

expect a strong consolidation process inthe wholesale structure in the country.Existing foreign players are likely to contin-ue their aggressive investments into thedistribution system. For instance Metroplans to invest additional USD 650 millionand Texaco and Statoil USD 500 millionand USD 400 million respectively [PAIZ].Furthermore the development of the dis-tribution system in Poland has promptedchanges in the shopping habits of theconsumers. The share of the householdbudget spent on shopping in the modernretail formats is growing and in the largecities it reached 60 per cent at the end of2000, up from 50 per cent in 1999 [CAL].

This kind of dynamic development of thisindustry in Poland means enormous opp-ortunities for Norwegian investors, but italso means facing very tough competiti-on from large international players, if onedecides to enter the Polish market.Therefore the key to success in capitali-zing on this huge market potential is along-term strategy and ROI prospective,patience and commitment to the market,as well as deep local knowledge andhands-on management.

PRODUCTS WITH POTENTIAL

In this section we take a look at the Polishconsumer goods market and analysewhat kinds of consumer products havepotential the to succeed in the Polishmarket place. First potential products forexports are analysed and then we lookinto promising consumer products gene-rally.

EXPORT PRODUCTSTalking about export products, we haveto mention two major market conditionsthat have a major impact on the rangeof products that can be exported fromNorway to Poland. First of all, there arevery high production costs in Norway, notonly compared to Poland, but also com-pared to many EU member states, suchas Germany, France, the Netherlands.Norwegian producers would meet toughcompetition from exporters from thesecountries in Poland, not mentioning localPolish producers. Second, Norway beinga non-EU country faces less favourablecustom tariffs than EU member states andeven less favourable than the CEFTAcountries (Hungary, Czech Republic, etc.)

The consumer retail market

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[KOT]. It is worth mentioning that the cus-toms tariffs against Norway will becomeeven less favourable than the existingones, once Poland joins the EU.

These two conditions result in Norwegianproducts being unjustifiably expensive forthe mass consumer market in Poland.Norwegian products come out muchmore expensive than Polish products inthe same product category as well asGerman or Dutch products [KOT]. Theonly way to justify such marks-ups compa-red to competitors is to have a superiorbrand, which is able to charge higherprice premiums than competitors and/ora niche, or luxury product that is clearlydifferentiated from the competitors’ pro-ducts. One possible example of such astrategy could be an exclusive salmonbrand, which is intensively marketed inPoland. Salomon is a product that givesNorwegian producers a natural competiti-ve advantage per se, since Polish salmonis of inferior quality. Provided that a supe-rior brand is created for this salmon pro-duct, it can charge a higher price pre-mium than competitors and thus be ableto compete in the market. Furthermorethe Norwegian country-of-origin could beutilized in creating such a brand, sinceNorway enjoys a positive image inPoland.

PRODUCING LOCALLYIf we talk about relocating the productionof consumer products to Poland or to aCEFTA country which has favourable cus-toms agreements with Poland, then weare talking about much broader range ofproducts. In this case Norwegian produ-cers naturally are not limited by the unfa-vourable factors connected to Norway asthe production location, and can utilize

many of the market opportunities in thePolish market.

Some of the consumer products in Polandwhere consumption is growing rapidly arefish, high margin/ value added types ofcoffee, e.g. Lavazza, wine and beer, was-hing powder, hygiene products as well asvarious kinds of ready-made meals [REM].Clearly there are opportunities in theseand other product categories, forNorwegian producers who are preparedto thoroughly invest in the Polish market.Apart from investing into own production,another option is of course to purchasean existing Polish producer in the productcategory of interest. Finally, apart fromthe previous discussion on exports, pro-ducts that we refer to here, need not besuperior brands, but can in fact fall into allprice categories and consumer seg-ments.

COMPETITION

For foreign companies it is not easy tosucceed in the Polish consumer market.The competition between different firms ishard, and the margins between successand failure are small. Until now Germanand French companies have oustedNorwegian companies. In addition tothese successful companies, Great Britainand the Netherlands have invested muchin Poland [PAIZ]. The German and French companies havemanaged better than the Norwegians formany reasons. They often offer better pri-ces and more products than theNorwegian companies. An example of afailure is Norwegian chain stores, whichaimed at shops with few kinds of productsand only frozen fish and meat. The Polish

Figure: Consumer 5

Major foreign retail companies

92

REFERENCES

[CAL]“The Retail Market in Poland – deve-lopment trends”, CAL CompanyAssistance, 2001

[PAIZ]“The Polish Consumer Market”, PAIZ,2001URL:<http://www.paiz.pl > (CitedJanuary 2002

[KOT]Kotlin. Meeting 4 January 2002

[REM]Robert Szewczyk and Morten Carlsen,Rema1000 Poland, meeting 7 January2002Industry Canada, “InvestmentClimate Poland” [Online]URL:<http://strategis.ic.gc.ca/SSG/bi18502e.html>, [Cited 30 January 2002]

Ewa Burdon. Meeting 3 January 2002

Poradnik Handlowca January 2002

customers often prefer shops that sellfresh products.

Previously the localization of the storeswas an important factor for getting suc-cess. The sooner a company started theirbusiness the more strategic localizationstheir shops got, like in the city centre orrailway junction. This is still important forsmall local shops and supermarkets. Butthe opportunity to locate a store near thecity centre is now little since the consumermarket already is covered in Poland.Therefore the companies have to useother factors like lower prices and moreextensive variety of products to succeed.

In the last few years the hypermarketshave been a new opportunity to get mar-ket share for foreign chains. Since thehypermarkets are outside the city centresuch places need large investments to

make people come there for shopping.Therefore they have to supply a lot ofshopping possibilities and also activities.

The number of hypermarkets has increa-sed considerably the last years and is nowquite high in Poland compared to othercountries in East Europe. But it is still one ofthe countries with the fewest hypermar-kets per million people (see FigureConsumer 7). Still, more and more peopleprefer to do their shopping in hypermar-

kets, and the competition between diffe-rent stores is hard. Having said that, mostpeople make their purchases in the small,local shops. [REM]

The consumer retail market

Small, Local Shops 43,8 %

By the Producer 0,6 %

The Market place 7,1 %

Hypermarkets 20.2 %

Supermarkets 27,9 %

Other 0,3 %

Figure: Consumer 6 Figure: Consumer 7

93

www.ib.no

ib@ib.no

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The IT and telecommunications sector inPoland has continued to expand at arapid pace over the past few years, but isstill far behind Western European standard.In 2000 the number of PCs per 100 inhabi-tants was 6.89 in Poland, compared to49.05 in Norway. In the same year, only 7per cent of the Polish people were consi-dered Internet users, compared to 49 percent in Norway. [ITU]

WIRE TELEPHONYThe wire telephony sector is dominated byTelekomunikacja Polska S.A. (TPSA), whichprovides services to 93.5 per cent of all wiretelephony subscribers (10.2 million people)and is a telecommunications giant with astaff of over 68 500 and total revenues ofUSD 3.4 billion in 2000. Since 1997, indepen-dent telephone networks have been emer-ging in Poland, but TPSA still has the majori-ty of the subscribers. In 2000 TPSA had 93.5per cent of the total subscribers, while thelocal operators had only 6.5 per cent ofthe market. [PAIZ]

CELLULAR TELEPHONYCellular telephony is the fastest growingsingle segment of the telecommunicationsmarket. The number of subscribers doub-led: as of end 2000, there were 7450 thou-sand subscribers (in relation to 3956 thou-sand subscribers in 1999 – a growth of 88.3per cent), while density ratio increased to19.3 mobile subscribers per 100 residents. Itis estimated that at the end of the year2001 there will be 9.5 million cell-phoneusers. In May 2001, after one year of intro-ducing WAP technology enabling theaccess to the Internet through a mobiletelephone set, the total sale of telephonesets with WAP on Polish market was 1.3 milli-

on units. [PAIZ]

Today, there are three cellular telephonyoperators in Poland with seven networksbased on the following standards: NMT 450(PTK Centertel), GSM 900 (Polska TelefoniaCyfrowa; Polkomtel and PTK Centertel),GSM 1800 (PTK Centertel – Idea; PolskaTelefonia Cyfrowa and Polkomtel sinceMarch 2000).

INTERNETIn Poland, like in other countries, theInternet is becoming increasingly popularas a source of information and communi-cations medium.

The existing ISP (Internet Service Provider)market is still very fragmented in Poland. It isestimated that over 550 licences forInternet access and data transmission servi-ces were issued by the end of 2000. At theend of 2000, the number of Internet hostswas estimated at roughly 88 per 10 000 resi-dents. [ITU]

At the same time, a marked ISP acquisitionand consolidation trend appeared inPoland. This involved the creation of strong-ly capitalized holding companies andgroups. In 2000 the leading firms providingInternet services were: NASK, InternetPartners, Softbank, AtCom, Teleglobe,Wirtualna Polska, SM Media, Interia.pl. Themost popular portals in Poland are Onet.pland WP.pl (Wirtualna Polska). However,TPSA continues to enjoy a dominant positi-on among ISPs. Having access to a hugenumber of subscribers, at affordablemodem prices (on average USD 50), TPSAeasily increases its revenues from these ser-vices. In fact, a majority of other Internetproviders relies on TPSA, as their customerslog on to servers via conventional wiredtelephony systems. Besides, TPSA is anowner of TP Internet Company, which star-ted up a portal of a name Portal.pl in thefirst half of 2000. In 2000, TPSA proceedsfrom Internet services accounted for 2 percent of all its revenues (0.8 per cent in1999), while for other leading providers theyrepresent 80 per cent to 100 per cent ofrevenues (8 per cent in the case ofSoftbank). [EITO]

IT - Telecommunications

0 3 6 9 12 15

0 3 6 9 12 15

2001*

2000

1999

Number of mobile phones

People on waiting list for phone installation

New fixed phone subscribers

Number of fixed phone lines

*Estimates

Source: [GUS]

In millions

Telecom statistics

Figure: IT 1

95

TELECOMMUNICATIONSPolish telecommunications services are themost profitable sector of economic activityin Poland, with mobile services as the fas-test growing segment of the market [USCS].

The international services market will beliberalized after 1 January 2003. Domesticlong distance services will open for compe-tition in 2002, when most licensing require-ments will cease. Currently, licenses are

required for all telecommunications activiti-es. The new Telecommunications Lawcame into force as of January 2001 andfacilitated a liberalized and competitivetelecommunications market.

Despite dynamic growth, telecommunicati-ons in Poland still lag behind EU develop-ment, which is best reflected by the avera-ge telephone density factor (26 in the endof 1999). As of 1 January 1999 in France itreached 58.3, in Germany 56.6, in Spain41.7 and in Portugal 41.3. In the mobile telecommunications' seg-ment Centertel, the analogue cellular net-work operator using the NMT 450i systemdominated the cellular phone market till1996. The tender for GSM licences that tookplace in early 1996 resulted in the announ-cement of two operators, the Polkomtel("Plus" GSM) and Polska Telefonia Cyfrowa("Era" GSM). On 1 March 1998 Centertelstarted operating a DCS cellular phone sys-tem. At the beginning of 2000 PolskaTelefonia Cyfrowa was the mobile marketleader, closely followed by Polkomtel.

MARKET TRENDS AND NUMBERSAlthough 2000 saw a slower increase in thenumber of fixed telephony subscribers (inthe Telekomunikacja Polska S.A. network)than in the previous year, mobile telephony

recorded a rapid growth. Altogether, thesale of communications services considera-bly increased.

At the end of 2000 there were 10 034 400fixed telephone subscribers, including 7 695400 in urban areas and 2 339 000 in ruralareas. The rate of expanding fixed telepho-ny network in rural areas significantly incre-ased by 13.9 per cent compared to 1999.In 2000 the increase of the number of mainsubscriber lines, i.e. standard main lines,plus ISDN lines in the TPSA network was 599000, including 293 100 in rural areas. Thus,at the end of 2000 the number of mainlines was 10 242 100, a 7.3 per cent increa-se compared to the 1999 level. [FTRI]

COMMUNICATIONS

Telekomunikacja Polska S.A. provides tele-communications services in Poland, first ofall, but there are also other local operatorsas well as networks of cellular telephonescovering the whole country.

On 1 July 2001 changes in long-distanceconnections were introduced, followingliberalization of this sector of telecommuni-cation services. In addition toTelekomunikacja Polska S.A., long-distanceservices are provided by: Netia, Niezalezny

Operator Miedzystrefowy (NOM) and ENER-GIS Polska. In order to obtain automaticconnection with a subscriber in anothercity when calling from Poland, you shoulddial "0", followed by access code, areacode and subscriber number.

TELECOM SERVICESTelekomunikacja Polska S.A. is the domi-nant fixed-line telecommunications opera-tor in Poland. TPSA also owns 66 per cent of

0 10 20 30 40 50 60 70 80

Telekomunikacja Polska S.A

NASK

Internet Partners

Softbank

Most important Internet providers revenues in Poland in 2000

(in USD million)

Source: [EITO]

0

5

10

15

20

25

30MobileFixed-line

20001999199819971989

Telephone Subscribers per 100 Inhabitants

Figure: IT 3

Figure: IT 2

96

a mobile operator Centertel.Approximately 30 per cent of TPSA's subscri-bers are still connected to analogueexchanges, which exclude them from mostvalue-added services. All new networks arebuilt to modern digital standards.

Even though competition in telecommuni-cations service was introduced in 1996,when the first licences for local telephoneservices were issued, TPSA still maintains itsdominant position.

So far, the Ministry of Posts andTelecommunications has allowed Era GSMto provide Voice over Internet Protocol(VoIP) as a pilot project. VoIP is also beingoffered by several ISPs, mainly in corporatenetworks. Tele2 Polska and MediaTel arenew companies offering international VoIPservices.

REGULATORY FRAMEWORKLicences or concessions are necessary forproviding any telecommunications activity.A licence is issued with a permit to buildand operate company-owned infrastructu-re. Separate licences are required for vari-ous activities. For example, telephone ope-rators must apply separately for a license toprovide data transmission or Internet servi-ces.

In accordance with Poland's agreementunder the WTO, TPSA will maintain its mono-poly for international phone services until2003. Foreign investments in long-distance,cellular and data transmission companiesare currently allowed only up to 49 percent. There are no foreign investment limitson local phone services or certain Internetservices.

INFRASTRUCTURETPSA maintains over 11 000 km of fibreoptic data transmission cables in its net-work using Polpak X.25 protocol andPolpak-T (high-speed backbone network inFrame Relay/ATM technology). Its main ser-vices are Permanent Virtual Circuits (PVC)and Virtual Private Networks (VPN). In July2000 TPSA signed contracts with Alcateland Lucent Technologies for SDH andDWDM equipment in order to build a fastoptical network for expanding data trans-mission, video, and fast Internet access ser-vices. Other fiber optic nation-wide infra-structures belong to Polish Railways PKP (5000 km) and Tel-Energo operating thePolish Power Grid Company (PSE) network

(8 000 km). Additionally, Telbank operatesthe banking sector network (Telbank-M inFrame Relay technology, Telbank-T used fortelephone, teletransmission and multimediaservices, and Telbank-P packet transmissi-on). Netia is planning to construct its ownteletransmission network based on opticaltechnology. This network will link Poland'stwelve largest cities by the end of 2000.Formus operates a broadband wireless net-work. Newcomers to the market are localtelephone operator Szeptel and Pro Futuro.

RANGE OF SERVICESTPSA's value added services are availableto approximately 70 per cent of its custo-mers (those who are connected to digitalexchanges and have touch-tone phones).Value added services offered by TPSAinclude: call forwarding, call waiting, bar-ring outgoing calls, hot line, automaticalarm, and detailed billing. In the spring of2000, TPSA launched its voice mail servicebased on Alcatel's technology. This free-of-charge service was first introduced in fourcities but will be expanded soon. In the firstquarter of 2001 TPSA offered unified messa-ging service.

Most cable television networks have experi-mented with pilot Internet access projects,but these services remain mostly futureplans. Internet access is not availablethrough digital satellite television operatorsWizja TV and Cyfra+. A new company, TPIP,created in July 2000 by TP Internet (a TPSA-owned Internet subsidiary) and Polsat tele-vision, is expected to offer services linkingthe capabilities of Internet and television.

MOBILE SERVICESAll Polish cellular operators offer prepaidsystems, SMS, e-mail and Internet accessthrough WAP (Wireless ApplicationProtocol). Polkomtel began offering SurfPlusWAP service in its Plus GSM network inDecember 1999, addressing mainly corpo-rate users. Polkomtel also uses Nokia HSCSD(High Speed Circuit Switched Data) tech-nology. Polkomtel is actively promotingWAP development through its WAP club, aforum for the development of mobileInternet services in Poland. Polkomtel is alsosetting up a laboratory, which will enablesuppliers of new services to test new termi-nals and WAP applications. Plus GSM offersseveral new intelligent network servicesincluding one number for up to 6 telepho-nes, corporate networks and free compa-ny numbers. Plus GSM introduced in 2001 a

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new Graffiti Plus service, enabling transmis-sion of pictures and simple graphic infor-mation of up to 120 characters. Centertel'sWAP Idea service is addressed to all users,including those using pre-paid services.

Era GSM began offering WAP service inJune 2000, addressing this service to allusers, thanks to a wide selection of WAPtelephones. All three cellular operators aretesting GPRS (General Packet RadioService) for packet transmission andInternet access. The first WAP service waslaunched in January 2000, soon after WAPbecame available in the Plus GSM net-

work. Several new applications are beingcurrently developed, including m-commer-ce solutions, banking services (WBK was thefirst), and services based on GPS technolo-gy. It is estimated that approximately 200Internet services and portals are currentlyavailable in Poland in WAP technology,including stock market information, travelguides, news, weather forecasts and manymore. In July 2000, Plus GSM launched firstInternet shop using WAP technology.

COMPETITIVE ANALYSISAlcatel, Lucent and Siemens, the majorinvestors in the telecommunications indus-try in Poland, provide most of the equip-ment for fixed-line networks. Other suppliersinclude Ericsson, Motorola, and Nokia. Mostlarge manufacturers maintain their ownoffices in Poland.

A number of foreign companies are pre-sent as minority investors in telecommuni-cations operating companies. These inclu-de: French Vivendi (in Elektrim-Telekomunikacja), Swedish Telia (in Netia),French Telecom (in Centertel), DeutscheTelecom (in Era GSM), Vodafone AirTouch(in Polkomtel), and British National Grid (inNG Koleje Telekomunikacja). Formus, GTSInternational and CEL Polska are also U.S.investors in telecommunications services.

Since the Polish telecommunications mar-ket is still restricted, value added servicesare being developed and offered only byexisting operators. Newcomers who wantto provide services enter into contracts withoperators and work under their licences.

SALES PROSPECTSThe market will become partially open in2002, with full liberalization planned in 2003.All currently operating companies are pre-paring for competition in the further deve-lopment of the infrastructure and new servi-ces.

MARKET ACCESSA typical method of entering the Polishmarket is through a Polishrepresentative/partner, who can offerexperience and knowledge of the localmarket and can watch for business oppor-tunities. For export sales to Poland, anagent or distributor is usually used. In mostcases, foreign companies that do not havea direct presence in Poland seek localcompanies to handle the type-approvalprocess and to look for business opportuni-ties. Companies with representative officesin Poland focus on promotion of the com-pany and its products, while actual salesare done through distributors.Telecommunication operators tend to con-tract for turnkey projects, which include allkinds of equipment as well as its implemen-tation. It is strongly recommended, therefo-re, that foreign manufacturers promotetheir products to major equipment provi-ders such as Alcatel, Lucent, Siemens,Ericsson, and others if there is no conflict ofinterest.

END USER PROFILECorporate end-users are the most desirableclients for all telecommunications services,and they generate the most profit. TheWarsaw metropolitan region, with 1 millionprivate subscribers and 300 000 business

1999 2000 2001*

Number of fixed phone lines 10 080 000 12 100 000 15 000 000New subscribers 1 270 000 2 000 000 2 500 000Telephone density (per 100) 26 29 33People on waiting list for phone installation 2 000 000 1 200 000 400 000Number of mobile phones 4 000 000 7 000 000 10 000 000

* estimates

Statistical data

Figure IT 4

98

subscribers, is the most lucrative area forproviding services.

Netia estimates that business users bringfive times more profit than private users.Elektrim estimates that a business usergenerates 75 per cent of its income. TPSA'scustomers are 85 per cent individual usersand 15 per cent corporate. The largestcompeting operator, Netia, claims to have20 per cent business users. Individual usersvery seldom purchase value-added servi-ces, usually satisfying themselves with thebasic service, including a monthly subscrip-tion fee and additional message unit andlong distance charges.

Individual fixed-line users are linked only toTPSA and are difficult for other operators toreach. The extent of this difficulty can beseen in the astounding number (millions) ofindividuals who cannot get access to fixedline services at all.

Most operators focus on corporate users,who are more likely to be interested invalue-added services. In some areas newoperators have an advantage over TPSAbecause of their new fibre optic network.So far, new operators have been able torecruit 24 of the 500 largest companies inPoland, including some multi-national com-panies. In response, TPSA has stepped upits marketing efforts for corporate clientsand has significantly improved its servicefor them.

INTERNET

The Internet in Poland is still in an earlystage of development, with approximately2.5 million users and 2 000 e-commercesites. Recent market surveys estimate thatcompanies working in the "new economy"generate 6 per cent of Polish GDP. Thevalue of the e-commerce market in Polandfor the year 2000 is estimated at USD 35 mil-lion (by ING Baring) to USD 45 million.[WOOD]

MARKET OVERVIEWThere are approximately 2.5 million registe-red Internet users in Poland, but about 17per cent of the population has someaccess to the net, generally at their placeof employment [CEEBIC]. Over 90 per centof private users connect to the Internet bya modem through Telekomunikacja Polska

S.A. (TPSA), the national telecommunicati-ons operator.

Wireless broadband networks are beingdeveloped by Formus Polska, CrowleyInternational (Data Star network), ProFuturo and Tele2. TPSA is also investing inwireless broadband technology, and is cur-rently conducting a pilot project in Warsaw.

TPSA, Tel-Energo, Telbank and NG KolejeTelekomunikacja are the telecommunicati-ons operators maintaining backbone net-works in Poland, leasing lines and offeringcorporate users virtual private networks. Alocal telephone operator, Szeptel, is in theprocess of building another countrysidebackbone for data transmission. Othermajor Internet service providers, such asNASK and Internet Partners are developingtheir own infrastructure. Poland is currentlydeveloping an Internet2 network using opti-cal DWDM (Dense Wavelength DivisionMultiplexing) technology based on existingacademic metropolitan area networks.

INTERNET SECURITYEither system integrators implementing pro-jects or independent auditing companiesdo security audits at various levels. In caseof ISO procedures, independent compani-es must do audits.

Industry specialists report that most privateusers and a large percentage of Polishcompanies and organizations are not ade-quately aware of security issues. As a resultof the efforts of industry specialists, presscampaigns and published informationabout spectacular security-breaking cases,security awareness has been steadily incre-asing. It is estimated that half of all usershave no security systems and the other halfuse security packages available in theInternet free of charge.

Security issues are of great concern bymanagement of all kinds of financial institu-tions, service providers and companiesalready involved in (or thinking about) e-commerce applications. Most banks alrea-dy offer their services through the Internet,are in the process of implementation orhave plans to do so in the near future. Allbanking projects offer secure transactionsbased on strong multi-level authenticationsystems, have advanced firewall systemsand intrusion detection systems. Banks donot release specific information about their

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network security, but the general opinion isthat it is at the state-of-the-art.

There are no general standards for securityproducts in Poland. The government hasintroduced procedures for ensuring securityin the public sector, especially in the areaof protecting non-public information. Onlycertified products can be used in publicadministration networks.

E-COMMERCE AND SECURITYThere are several initiatives aiming to provi-de security measures in e-commerce.PolCard, provider of the most popular cre-dit card authorization service, has been thefirst to offer on-line authorization services.PolCard recently launched an online scre-ening feature to increase transaction secu-rity. Computer Land's eCard, the ExportDevelopment Bank and WBK also provideon-line authorization services with their soft-ware and security packages. Cavern sc, aPolish representative of Planet Paymentauthorization centres, also offers on-lineauthorization.

CRTI, established by Interia.pl, ProkomInternet, Softbank and tp.Internet S.A. inmid 2000, is also focusing on settlement ofInternet transactions. Centrast (establishedby tp.Internet and jointly owned by TPSA,the National Bank of Poland, Associationsof Polish Banks, National Clearing House,Warsaw Stock Exchange, Polcard, Telbank,and several banks) is developing securityinfrastructure for financial transactions in acommon e-banking network. A Polish com-pany, Unizeto, offers third-party certificationservices in cooperation with the NationalClearance Agency. Telbank-EnigmaCertification Office offers certification servi-ces for banks and e-commerce compani-es. Polbox has just launched a new DigitalID service allowing users to create theirown e-signature and use encrypted e-mails. This service is free for private users.Another company, iTel, is about to launcha secure platform for e-commerce.

MARKET TRENDSAwareness of the importance of computersecurity issues is rapidly increasing. The mar-ket for security solutions is splitting betweenthe high-end of the market, which is increa-singly investing in reliable and proven soluti-ons, and the low-end users, who are imple-menting publicly available free packages.Industrial users tend to purchase securitysolutions from suppliers already providing

their hardware, software and networkingproducts. The Polish market definitely tendsto invest in solutions proposed by well-known suppliers, which have already pro-ven useful elsewhere and are consideredas industry standards or comply with indus-try standards.

LEGAL FRAMEWORKPoland controls the importing, exportingand usage of encryption software andhardware, in accordance with EuropeanUnion agreements. There are no problemsassociated with bringing (for personal use)a laptop computer with encrypted soft-ware into Poland.

The general outline of legal procedures forimporting encryption hardware and soft-ware is as follows: the importer or the end-user in Poland is responsible for workingwith Polish authorities to obtain an opinionand an import permit for bringing the pro-duct into Poland and is held responsible forits proper use. The foreign supplier is expec-ted to provide a technical description ofthe product. It usually takes 3-4 weeks toobtain an import permit for encryption soft-ware/hardware. There is a separate proce-dure to allow the use of specific encryptionproducts in Polish public installations. Thisprocedure is initiated at the same govern-ment office. [CEEBIC]

E-COMMERCEGENERAL OVERVIEWThis section considers the development ofe-commerce in Poland. First of all we revi-ew the general prerequisites for the suc-cessful development of e-commerce.Further we take a closer look at the B2B(business to business) and B2C (business tocustomer) areas of e-commerce respecti-vely.

To start with, among the general factors forthe development of e-commerce are thelevel of Internet penetration, developmentof the telecommunications and affordabili-ty. When it comes to the level of Internetpenetration, it expanded rather extensivelyduring the 90s with growth slowing downsomewhat in the year 2000. As a result thelevel of Internet penetration in Poland cur-rently is ab. 14 per cent [ACC]. This is lowercompared to the levels of UK (38 per cent),Germany (32 per cent) and France (19 percent). However this makes the Polish on-line

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community the largest in the CentralEurope, simply due to the size of the Polishpopulation. As mentioned the Internetgrowth has levelled off due to the lack ofhardware, Poland still has a very low PCpenetration level, lack of Internet connecti-ons, low education about Internet amongcertain population segments. In addition tothat a large barrier to the expansion of theInternet is low incomes in Poland as well asthe monopoly status of TPSA, which keepsthe Internet charges artificially high.

Overall the volume of e-commerce inPoland, Hungary, Czech Republic andSlovakia is estimated to USD 650m in 2001.While Czech Republic currently is the lea-der in the volume of e-commerce inEastern Europe, Poland is expected toovertake it by 2005 on the grounds ofpopulation. [EIU]

B2B E-COMMERCEDue to the described above limitations inthe development of Internet usage by con-sumers and telecommunications, one canexpect private companies to be the prima-ry growth engine of e-commerce inPoland. According to the survey conduc-ted by Accenture in Poland in 2001, 48 percent of Polish companies plan to increaseexpenditures on e-commerce in the nea-rest 12 months. Moreover 47 per cent ofcompanies claim that their initiatives withe-commerce have been successful, while33 per cent claim that market conditionsmade them less enthusiastic about the e-commerce. The most popular applicationfor e-commerce is sales and marketing, fol-lowed by purchasing.

According to Accenture’s report, use ofthe B2B commerce is expected to growover the next year. This is supported by thefollowing results of the Accenture survey.For instance 77 per cent of the companies’executives are familiar with B2B exchangesand half of them plan to use suchexchanges for all their buying and supply-ing. This fact signifies good prospects forthe development of B2B e-commerce inPoland. A real example of such B2Bexchange is ce-market.com, which is anonline metal market exchange.

B2C E-COMMERCEThe development of the B2C e-commerceis lagging behind the development of theB2B e-commerce. The main barriers for thatare low levels of PC penetration, high

Internet connection charges by TPSA, lowincomes that, as mentioned above, haveslowed down the growth of the Internetpenetration. Furthermore only 20 per centof the Polish online retailers allow creditcard payments and only 8 per cent of thePolish online shoppers use credit card onli-ne [ACC]. This kind of general market situa-tion clearly makes further expansion of theB2C e-commerce rather difficult.

From the consumer needs prospective, twoimportant factors for the consumers are theneed for control and trust. Consumers feela larger need to control the shopping envi-ronment, than in the case of usual shop-ping experience. Additionally they need tohave a high degree of trust to online retai-lers in order to use them. This may be pro-blematic to achieve in the Polish retailindustry, which is very dynamic andunstable. Therefore one can expect a lowdegree of trust from the Polish consumersto the online retailers in Poland.

One area of B2C e-commerce that maycurrently have larger potential thanInternet-based consumer e-commerce, iswireless e-commerce. Mobile communica-tions market has had, and still is havingexplosive growth with 18 per cent penetra-tion level in the year 2001. This has almostdoubled during the last year. Apart fromthe fact that this type of B2C e-commerceis likely to grow faster than Internet pene-tration levels, it can allow for paymentalternatives that get around the problemof credit card payments on the Internet.This solution also overcomes the limitationthat credit card penetration level in Polandmay be low. Moreover by utilizing the exis-ting reputation of mobile operators, retai-lers can win the trust of the consumers, afactor that is crucial for consumers in orderto start using this mode of shopping.

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The Largest Internet Portals

Onet.pl (www.onet.pl) – reported tobe the best known portal, visited by58% of Polish Internet users.

Wirtualna Polska (www.wp.pl) – thesecond best known, visited by 54% ofPolish Internet users.

Source: EIU Country Profile 2001

Major Trade Events

National TelecommunicationsSymposiumin Bydgoszcz, 12-14 September 2002

Technical and scientific seminar oftelecommunication specialistsaccompanied by an exhibition(approximately 160 companies). Veryfocused audience.Organizers: Instytut TelekomunikacjiAkademii Techniczno-RolniczejAl. Prof. S. Kaliskiego 785-796 Bydgoszcztel 48/52/3408395fax 48/52/3408330http://kst.atr.bydgoszcz.pl/english.htm

INTERTELECOM,in Lodz, 21-24 February 2002

International Fair ofTelecommunications - event devotedexclusively to the telecommunicati-ons sector.Approximately 300 exhibitors.Organizers:Lodz International Fairul. Wolczanska 19990-057 Lodztel. 48/42/6372934

fax 48/42/6372935http://www.mtl.lodz.pl/indexenINFOSYSTEM,in Poznan, 23-26 April 2002The International Fair of Electronics,Telecommunication and ComputerEngineering. Range of products isvery wide and covers all related sec-tors. Approximately 400 exhibitors.Organizers:Poznan International Fairul. Glogowska 1460-734 Poznantel. 48-61-8692592fax 48-61-8665827http://www.mtp.com.pl/en/menu.htm

References

[ACC]Accenture: “Accenture GlobalReport on E-commerce – ‘PolandCountry Analysis’”, 2001

[PAIZ]Polish Agency for Foreign Investment(PAIZ): “The TelecommunicationsSector in Poland,” September 2001

[CEEBIC]The Central and Eastern EuropeBusiness Information Center, August2001

[ITU]International TelecommunicationsUnion, 3 April 2001

[WOOD]Wood & Company E-Commerce

Market Report, 2001

[EIU]The Economist Intelligence UnitLimited: “The Economist IntelligenceUnit Country Profile -”Country ProfilePoland”, 2001.

[EITO]European Information TechnologyObservatory (Online)URL: <http://www.eito.com> [Cited 26January 2002]

[FTRI]Foreign Trade Research Institute:“Poland - Your Business Partner”, 2001

[USCS]U.S. Commercial Service, Warsaw:“Telecom Services Market Summer2000”, 2000

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Project Members

Marie Jahr Glomnes (24)Study Option: Masters ofScience in Business degreeGraduates: Spring 2003Sectors: The Consumer RetailMarket, Human Capital

Heidi Berg (22)Study Option: CEMS Master ofInternational Business degreeGraduates: Fall 2003Sectors: Fish Exports andIndustry, Shipbuilding

Fredrik Zachariassen (25)Study Option: Masters ofScience in Business degreeGraduates: Spring 2004Sectors: Banking and Finance,Human Capital

Alexander Jacubanecs (27)Study Option:Cand. Merc spesialization in brand mana-gement. Graduates: Summer 2002Sectors: The Consumer RetailMarket, IT -Telecommunications

Kirsten Olesen (23)Study Option: Masters ofScience in Business degreeGraduates: Spring 2004Sectors: Energy andEnvironment, The ConsumerRetail Market

Marianne Tandberg Haugsjaa (23)Study Option: Masters ofScience in Business degreeGraduates: Spring 2004Sectors: Energy andEnvironment, Fish Exports andIndustry

The Norwegian School of Economics and Business Administration (NHH)

The Norwegian School of Management (BI)

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Snorre Haugnes (24)Study Option: Masters ofScience in Business degreeGraduates: Spring 2002Sectors: Setting up Business,IT -Telecommunications,

Maciek Smaga (24)Study Option: Masters ofScience in Business degreeGraduates: Spring 2002Sectors: Energy andEnvironment, The LegalFramework, TransportationInfrastrucure

Liv-Karin Trinborg (22)Study Option: Masters degreefrom the Deparment ofChemistry Graduates: Spring 2004Sectors: Fish Exports andIndustry, The Consumer RetailMarket

Helga Stenseth (21)Study Option: Masters degreein Industrial Economics andTechnology Management Graduates: Spring 2004Sectors: Fish Exports andIndustry, Shipbuilding andSupport facilities

Andrzej Golebiowski (20)Study Option:Masters degreein Industrial Economics andTechnology ManagementGraduates: Spring 2005Sectors: Energy andEnvironment, Human Capital

Håvard Odden (27)Study Option: Masters degreefrom the Department ofElectrical Engineering AndTelecommunicationsGraduates: Spring 2003Sectors: Shipbuilding, IT -Telecommunications

The Norwegian University of Science and Technology (NTNU)

104

Meetings and people that have contributed to the report

Dato Loaction Company / Institution Title

28.12.01 Kielce Biovac Sp.z.o.o. Chairman of the board, Managing Director03.01.02 Warszawa Embassy Ambassador03.01.02 Warszawa Embassy First Secretary04.01.02 Warszawa Mostostal Siedlce04.01.02 Warszawa Mostostal Siedlce Project Manager04.01.02 Warszawa Kotlin President07.01.02 Warszawa REMA 1000 President07.01.02 Warszawa REMA 1000 Director of Marketing & PR07.01.02 Warszawa Danske Bank Polska Vice Presient, head of business development07.01.02 Warszawa Danske Bank Polska Treasurer07.01.02 Warszawa Optimus07.01.02 Warszawa PAIZ Managing Director07.01.02 Warszawa PAIZ Junior Specialist in PR07.01.02 Warszawa PAIZ Senior Project Officer07.01.02 Warszawa Ministry of Economy08.01.02 Warszawa Telenor Satellite Polska S.A.08.01.02 Warszawa Alcatel Polska S.A.08.01.02 Warszawa Statoil Polska Sp.z.o.o. Managing Director Poland08.01.02 Warszawa Royal Norwegian Embassy08.01.02 Warszawa Royal Norwegian Embassy Market Adviser08.01.02 Warszawa Royal Norwegian Embassy Senior Marked adviser09.01.02 Warszawa Institute of Labour and Social Studies Professor08.01.02 Warszawa SEGEL Business Adviser10.01.02 Bochnia Contimax Managing Director14.01.02 Gniewino Big Fish S.A. Chairman of the board, General Manager15.01.02 Gdansk Mostostal Gdansk S.A. Manager, Radiation protection officer15.01.02 Gdansk Mostostal Gdansk S.A. Chief of Technical Office16.01.02 Gniew Ulstein Fama

Sopot Det Norske Veritas Prokurent17.01.02 Sopot Det Norske Veritas Country Manager17.01.02 Gdynia Wilbo Chairman of the board17.01.02 Gdynia Wilbo Vice-Chairman of the board, Director of Production17.01.02 Gdynia Wilbo Specialist of Financial Analysis and Planning17.01.02 Sopot University of Gdansk Professor14.01.0215.01.02 Swinoujscie Morska Stocznia Remontowa Commercial Manager16.01.02 Swinoujscie Morska Stocznia Remontowa15.01.02 Swinoujscie Odraport16.01.02 Szczesin Unitor Polska Sp.z.o.o. Ships Equipment Division16.01.02 Szczesin Unitor Polska Sp.z.o.o. Ships Equipment Division10.07.01 Oslo Telenor ASA PR & Projects Manager13.08.01 Oslo Norwegian Trade Council27.04.01 Oslo Embassy of the Republic of Poland Representative06.11.01 Oslo Embassy of the Republic of Poland Commerciel Councillor06.11.01 Oslo Embassy of the Republic of Poland Commercial Attache06.11.01 Oslo Embassy of the Republic of Poland Financial Attache10.12.01 Oslo Hydro Energy Key Account Manager18.12.01 Oslo SND First Vice President

Oslo Private Advisor

First Vice PresidentAdvisor

Name Surename Phonenumber Website

Zbigniew Dyk 48-41-368-33-03 www.biovac.plSten Lundbo 48-22-696-40-30Merete Wilhelmsen 48-22-696-40-30Stanislaw RytelPiotr Kolodziejuk 48-25-644-31-20Jacek Dziekovski 48-22-644-66-9 www.kotlin.com.plMorten Karlsen 48-22-818-94-03Robert Szewczyk 48-22-818-94-04Niels Valdemar Hansen 48-22-337-71-50Jesper Hehnel 48-22-337-71-10Jacek KrawczykJoanna Mikos 48-22-334-98-00 www.paiz.plAgata Szczepanska 48-22-334-98-54 www.paiz.plPawel Sobków 48-22-334-98-38 www.paiz.plHalina Bownik-Trymucha 48-22-693-55-28Piotr Wilczek 48-22-651-62-50Marek Omilian 48-22-515-50-00Ewa Grabarczyk 48-22-622-22-02 www.statoil.plOle Sundnes 48-22-699-72-41 www.eksport.noHege Haaland 48-22-699-72-41 www.eksport.noAleksandra Buczkowska 48-22-699-72-41 www.eksport.noMieczyslaw Kabaj 48-22-628-75-85Kaare Nordbø 48-605-957-995 www.segel.noAndrzej Cieslik 48-14-611-87-25 www.contimax.plKrzysztof Szymborski 48-58-676-71-61 www.bigfish.plStanislaw Iwaszkiewicz 48-58-343-16-61 www.mostostal.gda.plZbigniew Deinrych 48-58-342-16-05 www.mostostal.gda.plMiroslaw Pastewski 48-58-535-25-25Krystyna Kolomyjska 48-58-511-50-00 www.dnv.comKnut Solberg 48-58-511-50-00 www.dnv.comJerzy Kuncicki 48-58-663-54-44 www.wilbo.plGrzegorz Nonna 48-58-663-54-49 www.wilbo.plMaciej Piwowski 48-58-663-54-44 www.wilbo.plAnna B. Kisiel-Lowczyc 48-58-551-58-82 www.univ.gda.plJan KubiakJaroslaw Stepien 48-91-321-51-93 www.mrs.com.plSlawomir Wachuda 48-91-321-51-94 www.mrs.com.plFriedhelm Boberg 48-91-462-35-85John Morgan Cyren 48-91-462-35-85Andrzej Mlodkowski 48-91-462-35-85Nicola Rivli 47-22-77-99-00 www.telenor.noJon Hansen 47-22-92-63-00 www.eksport.noIgor JelinskiBohdan JelinskiWlodzimierz GeloKrzysztof Kocon 47-22-60-24-48Lena Rudstrøm 47-22-53-81-00 www.hydro.comErik Welle-Watne 47-22-00-25-00 www.snd.noWitold Smaga 47-93-23-76-59

Erik Welle-Watne 47-22-00-25-00 www.snd.noWitold Smaga 47-93-23-76-59

www.mostostal.siedlce.pl

www.rema1000.com.plwww.rema1000.com.plwww.danskebank.com/plwww.danskebank.com/pl

International Business

105

N T N U

You can choose among 1700 courses in science and technology,art, music, medicine and the humanities at the NorwegianUniversity of Science and Technology (NTNU). One in four of thepeople you meet in Trondheim is a student. Many of these areinternational students, and often they are attracted to Trondheimbecause of its internationally recognized R&D.We are also known for our continuing and further educationprogrammes. These are designed to keep scientists, managers andtechnologists updated with international developments in theirfields. In many of these fields NTNU is setting the pace.

For more information, please contact:Norwegian University of Science and TechnologyDivision of Student and Academic affairsN-7491 Trondheim, Norway phone: 47 73 59 77 00visit our Website: www.ntnu.no

Dreams help us learn

If there hadn’t been dreamsnothing but birds could fly

Mona-Lisa would just be a girl’s name

and nobody would ever have shouted: «Eureka»

byrå

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The Norwegian School of Manage-ment BI is one of the largestresearch-based educationalinstitutions within the areas ofbusiness economics and adminis-tration in Europe. The school offersa wide range of undergraduate andgraduate programs incl. Ph.D. In 1999 the Norwegian School ofManagement BI was accreditedby the European Foundation forManagement Development(EFMD) for high standards andquality within research andeducational programs.

Master of Science (MSc)• Multicultural classroom • Exchange programs offered for further international

experience • Two years fulltime • Specialization and academic depth within:

Financial Economics

Strategy & International Business

Marketing

Information Technology Management

An International Masters Degree in NorwayJoin one of Europe’s leading business schools and expand yourinternational career opportunities. The Norwegian School ofManagement BI can offer you two unique international mastersprograms.

For further information, www.bi.edu

MBA• 11 month general management MBA with focus on

strategy, leadership and crossfunctional teambuilding • Multicultural class with maximum 50 participants • Average age 33 with 7 years of work experience • "Hands on" consultancy project

Both programs are taught in English.

Admission requirements for both programs: Bachelorsdegree and GMAT score of at least 500. In addition, theMBA requires at least three years of relevant work expe-rience.

Turkey is a secular demo-cratic state governedunder the 1982 constituti-on. The Turkish parliamentcontinues to pushthrough legislativereforms, and on February4th 2002 the IMF executi-ve board approved anew three-year stand-byagreement, increasingthe funds available toTurkey to US$ 16 billion.Turkey is a dynamic,emerging market econo-my, with a reputation forprivate sector entrepre-neurship - there are alre-ady more than 4600enterprises with

foreign partnership inoperation in various sec-tors. The population is young, with over 67 milli-on people. The newest ITtechnology is quickly adapted and importedfrom the West. Turkey isstrategically located bet-ween Europe and Asia, inclose proximity to 70 percent of the world's ener-gy resources. The countryhas a large potential inthe paper/pulp andaquaculture sector, aswell as a strong maritimesector.

The Project Country of IB 2002/2003

Turkey

Singapore 1984/1985 Brazil 1985/1986 Australia 1986/1987Italy 1987/1988 China 1988/1989 Thailand 1989/1990Russia andBatlic states 1990/1991 Portugal 1991/1992 Mexico 1992/1993Hungary 1993/1994 Chile 1994/1995 South Africa 1996/1996India 1996/1997 Indonesia 1997/1998 Baltic States 1998/1999Brasil 1999/2000 Poland 2001/2002

Earlier Project Countries:

International Business

Norwegian School ofManagement Eivind Lyches vei 13P.O.Box 580N-1302 Sandvika Telefax: +47 67 80 41 61 Tel: +47 67 80 41 68

Norwegian University ofScience and TechnologyStud.Post 133 - NTNUN-7491Trondheim Tel: +47 73 59 57 65Telefax: +47 73 59 52 10

Norwegian School ofEconomics and Business AdministrationHelleveien 30N-5045 BergenTel: +47 55 95 94 35Telefax: +47 55 95 94 35

www.ib.no

International Business