INDUSTRIAL POLICY AND RESTRUCTURING – Polish case

1. INDUSTRIAL POLICY AND RESTRUCTURING – Polish case ETUC Summer School Kraków, 8.07.2005 Sławomir Adamczyk NSZZ Solidarność

2. Starting point -1989 political freedom but also a collapse of „old” economic system • Inflation – 389% • GDP decline – 10,5% • Real wage decline – 24% urgency for comprehensive transformation of the system INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

3. Transformation of economy - main principles • Establishing a legal framework • Stability • Liberalisation • Structural reforms But… Nothing about social dimention of the process INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

4. Recovery of the economy INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

5. Privatisation • main tool for building market economy • the best „panacea” for competitive challenges • employment in private sector only 9% (1990), mainly in SME’s • First time foreign employers present • no solution for „difficult sectors” INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

6. Employment in private sector (%) INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

7. Share of private sector in GDP (%) INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

8. Industrial policy (1) • Bad experiences with central-planned economy • Neoliberal approach (1990-93) – the best industrial policy is the lack of industrial policy • Rising social costs of transformation – necessity to take into account trade unions’ demands • 1994 – first social agreement at national level on privatisation issues INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

9. Industrial policy (2) • 1994 – Poland associated with EC • 1997 – opening of the accession negotiations • On this occasion Polish industrial policy is formulated • Horizontal policy vs structural dimention • Sectoral policy as an instrument for restructuring INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

10. Restructuring of „difficult” sectors • Based on agreements between trade unions, government and employers • Voluntary reduction of employment • Different tools for social protection and activation on the labour market were used • Preventing exclusion from labour market as a main goal INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

11. Restructuring of employment – steel industry INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

12. Restructuring of employment – mining industry INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

13. Restructuring of mining -comparison • British mining industry 16 years (1983-1999) - 235 000 workplaces reduced • Polish mining industry 13 years (1990-2003) - 260 000 workplaces reduced INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

14. Restructuring of employment - railways (PKP) INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

15. Foreign Direct Investments in Poland (accumulated, bln USD) INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

16. Foreign companies in Polish economy • 2001 – 11,5% GDP in private sector • Share of employment in private sector: 1995 – 2,8% 2001 – 5,7% • Main sectors: metal, banking, chemical industry, food processing industry INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

17. Foreign investors – case of Philips: • Global electronic competitor • 167 000 empl. in 150 factories around the world • Poland - 6 700 employers in 6 factories • European Centre of Lighting and European Accounting Centre (in the process of development) • Average annual export volume = annual export volume of entire coal mining industry = 1 billion USD INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

18. Multinationals and industrial policy • Some sectors dominated by MNCs • Introducing new technologies and innovative approach are advantageous for sectoral competitivity, but… • Reluctance to participate in sectoral dialogue • Lobbing used in order to put pressure on the government • Public interest often not compatible with the global strategy of MNCs INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

19. Relocation – what does it mean in Poland? • Moving production within Europe - opportunity for increasing competitiveness of the entire region (but social standards should be protected) • Main threat – delocalisation outside Europe (e.g. textile industry in Poland) • Positive attitude - moving investments from outside Europe (e.g. Goodyear, 3M) INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

20. German FDI (accumulated) in 2002 structure of outflowing (%) Source: Gdańsk Institute for Market Economics, Deutsche Bundesbank INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

21. Geographical directions of German investments in 2005 (%) Source: Gdańsk Institute for Market Economics, survey of German Chamber of Trade and Industry (DIHK) INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

22. Attraction of investments from outside Europe - case 3M (Minnesota, Mining& Manufacturing) • American based „conglomerate” MNC • 75 000 employees, 44 plants • Medical tapes division is to be moved to Poland from France… but also from Japan and USA • As a result Europe will became worldwide leader in this brand INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

23. Conclusions • Transformation in Poland: macro-economic stability achieved but privatisation too chaotic • Industrial policy not introduced in the beginning, enforced by trade unions and EU integration • Useful tool for sectoral restructuring • But after privatisation a lot of sectors are controlled by MNC’s, no possibility to carry on effective industrial policy • There is a need for European sectoral approach INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

24. And final remark There is no effective industrial policy without involvement of trade unions INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE