Poland's competitiveness - worldwide and in the EU


Presentation (Elaboration), 2004
10 Pages, Grade: 1,5 (A)

Excerpt

Table of Contents

1. The concept of national competitiveness by Porter

2. Assessing Poland´s competitiveness by means of Porter´s “competitiveness” concept
2.1. Assessing Poland´s competitiveness by means of the Global Competitiveness Index 2003/04
2.2. Assessing Poland´s competitiveness by the 2002 Regular Report of the European Commission

3. Poland´s competitive weaknesses

4. Poland´s competitive strengths

5. Future prospects of Poland´s competitiveness: threats and opportunities

6. References

1. The concept of national competitiveness by Porter

Competitiveness is nowadays one of the central preoccupations of governments and industries wordwide. Especially for reintegrating Central and Eastern European Countries (CEECs) into the world economy these countries´ national competitiveness plays a crucial role. Even if national competitiveness has become a widespread concept, there still exists no final definition, as scientists point out[1].

Though a first orientation about the concept of competitiveness can provide Michael E. Porter´s approach, in which he explains:

“The only meaningful concept of competitiveness at the national level is national productivity. […] No nation can be competitive in everything. A nation´s pool of human and other resources is necessarily limited. The ideal is that these resources be deployed in the most productive uses possible.”[2]

Using Porter´s definition as a first anchor for the assessment of Poland´s competitiveness, one has to closer examine Poland´s level of national productivity.

2. Assessing Poland´s competitiveness by means of Porter´s “competitiveness” concept

In the period of 1992 to 2000 Poland racked up average growth rates of nearly 5% annually. Thus in eight years the country has managed to double its gross domestic product (GDP), leaving other CEECs like Hungary or the Czech Republic far behind, whose GDP rose only about 2% in the same time period[3].

After Poland´s economy has slowed down from 2000 on, with GDP decreasing to 1,5% in 2002, mostly due to the world economic slow down, the GDP is expected to pick up again to 3% in 2003[4].

Moreover Poland has witnessed a remarkable increase in terms of GDP per capita, that leapt from 4,500 Euros in 1990 to 8,500 Euros in 2000, which corresponds to 40% of the EU average[5].

When comparing the data of Poland´s productivity with Porter´s definition, a rather high degree of competitiveness can be assumed. This assumption shall now be further verified by assessing Poland´s competitiveness with use of the Global Competitiveness Index 2003/04 (GCI) elaborated by the World Economic Forum[6].

2.1. Assessing Poland´s competitiveness by means of the Global Competitiveness Index 2003/04

The World Economic Forum´s Global Competitiveness Index splits up into two categories: The first category is the Growth Competitiveness Index, which evaluates the possibility for mid-term growth, including for example information about public institutions, the macroeconomic environment, the effectivity of the financial system, investment rates, education and technology, such as math and science education.

The second category of the GCI is the Microeconomic Competitveness Index, which contains information about a nation´s companies' strategy and operations, the quantity and quality of managerial skill technology, physical capital as well as the quality of a country's business environment: the quality of the infrastructure, administrative rules and regulations to name a few examples.

According to Porter, who has been one of the founding fathers of the GCI, the two categories of the competitiveness Index can be explained as follows:

A sound macroeconomic, political, legal and social context creates the potential for competitiveness, but it is not sufficient. Competitiveness ultimately depends on improving the microeconomic capability of the economy and the sophisitication of local companies and local competition[7].

Poland´s GCI 2003 ranking concerning its growth competitiveness is 45th out of 102 industrialized and emerging economies. This means an improvement compared with 2002, where Poland ranked 50th. In the category of microeconomic growth though Poland achieves rank 47th, dropping one place compared with 2002.

However in both categories Poland lies behind other CEECs like Estonia, Slovenia, Hungary, Latvia, Czech Republic, Lithuania or the Slovac Republic[8].

After all the GCI confirms Poland a fair macroeconomic competitiveness, but indicates its slight weakness in terms of its microeconomic competitiveness.

To discuss this fact, a third tool will be used to assess Poland´s competitiveness, namely the EU Copenhagen Criteria, on which the focus will be put next.

2.2. Assessing Poland´s competitiveness by the 2002 Regular Report of the European Commission

EU membership requires applicants like Poland to meet a broad set of political, institutional and economic requirements, known as the Copenhagen Criteria[9].

Here is dealt only with some aspects concerning the economic requirements.

In examining the economic developments in Poland, the Commission’s approach was guided by the June 1993 conclusions of the Copenhagen European Council, which stated that membership of the Union requires the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union[10]. That comprises

“a stable macroeconomic framework, allowing economic agents to make decisions in a

climate of predictability. It also requires a sufficient amount of human and physic capital, including infrastructure. State enterprises need to be restructured and all enterprises need to invest to improve their efficiency. Furthermore, the more access enterprises have to outside finance and the more successful they are at restructuring and innovating, the greater will be their capacity to adapt.”[11]

The fulfillment of the Copenhagen Criteria is assessed by the European Commission and summarized in an annual Regular Report. In its 2002 Regular Report the Commission states:

“Poland is a functioning market economy. The continuation of its current reform path should enable Poland to cope with competitive pressure and market forces within the Union. Improvements can be made to […] restructuring and privatisation, mainly in heavy industry, the financial sector, energy distribution and agriculture.”[12]

Here once again Poland´s microeconomic competitive weakness is being underlined. Thus it seems necessary to take a closer look at Poland´s microeconomic situation.

3. Poland´s competitive weaknesses

Whereas 97% of firms in the Polish economy (which equals more than 3 million) belong already to the private sector[13] as a result of the Polish Government´s Mass Privatisation Programme of 1993[14], the coal, steel, energy, heavy chemicals and defence-related industries are the key sectors that remain to be privatised and restructured. Since Poland rejoined the World Bank in 1986, the Bank has supported the economic transformation efforts through financing, policy dialogue and technical assistance worth of 4,6 Million dollars[15]. Still numerous challenges remain:

The agriculture sector accounts for 20% of the workforce and is dominated by unproductive small and medium-sized farms. The mining sector alone has annual losses of up to 1% of the gross domestic product, even though the pace of structural change has been considerable with the number of employees being halved since 1990. The steel industry faces the problem of overcapacity, lacking investment and also plans to halve the number of employees from now 80 000[16].

The restructuring and privatisation agenda in banking the financial sector is well advanced, but not fully complete: The government maintains ownership in only 7 institutions out of 54 compared to 1997, where it were still 15 state owned banks. One of the main characteristics of the sector is the high degree of foreign ownership. There are now 47 banks with majority foreign equity (against 29 in 1997)[17].

Yet small and medium-sized enterprises (SMEs), who have been the engine driving the economy, accounting for two thirds of total employment and half of GDP and exports, have been confronted with major difficulties in accessing external financing. For most Polish firms, investment is still mostly financed through retained earnings. Another major bottlenecks for realizing Poland's growth potential are particularly the transport and other physical infrastructure: The overall qualtiy of the road network is poor, suffering from under-investment in renewal and modernisation. As far as telecommunications infrastructure, the number of telephone subscribers has doubled since 1997, but the ratio of telephone density for fixed lines is still half of the EU average.

At 0.75% of GDP, spending on research and development is low by international standards, and mainly financed by the state. Even worse is the unablility of research and development institutes to co-operate with industry to make commercial use of scientific research results[18]. Thus Poland rests an factor and investment-driven rather than an innovation-driven economy, which according to Porter manifests a lower level of competitiveness of a nation[19].

[...]


[1] Michel E. Porter: The Competitive Advantage of Nations. London: Macmillan 1990, p.1.

[2] Porter 1990: p.6-7.

[3] Deutsche Bank Research: EU Enlargment Monitor May 2001, p.1. http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000032550.pdf

[4] World Bank: Poland Country Brief 2003, p.1. http://www.worldbank.org.pl/

[5] European Commission: Regular Report 2002 on Poland´s progress towards accession, p.36.

http://www.europarl.eu.int/meetdocs/delegations/pola/20021023/09.pdf

[6] World Economic Forum: Global Competitiveness Index 2003/04. http://www.weforum.org/site/homepublic.nsf

[7] Porter 1990: p.71.

[8] World Economic Forum: Global Competitiveness Index 2003/04.

[9] European Commission, DG Enlargement: Accession Criteria.

http://europa.eu.int/comm/enlargement/intro/criteria.htm

[10] European Commission: Regular Report 2002 on Poland´s progress towards accession, p.33.

[11] European Commission: Regular Report 2002 on Poland´s progress towards accession, p.41.

[12] European Commission: Comprehensive monitoring report on Poland´s preparation for membership 2003, p.5. http://europa.eu.int/comm/enlargement/report_2003/pdf/cmr_pl_final.pdf

[13] European Commission: Regular Report 2002 on Poland´s progress towards accession, p.39.

[14] Anna Fornalczyk: Company groups and development of competition in Poland. In: Hopt, Klaus J. (ed.): Unternehmensgruppen in mittel- und osteuropäischen Ländern: Entstehung, Verhalten und Steuerung aus rechtlicher und ökonomischer Sicht. Tübingen: Mohr Siebeck 2003, p.186.

[15] World Bank: Poland Country Brief 2003, p.1.

[16] Fornalczyk 2003: p.184.

[17] European Commission: Regular Report 2002 on Poland´s progress towards accession, p.40.

[18] European Commission: Regular Report 2002 on Poland´s progress towards accession, p.41-43.

[19] Porter 1990: p.546.

Excerpt out of 10 pages

Details

Title
Poland's competitiveness - worldwide and in the EU
College
Hamburg University of Ecomomy and Policy  (European Studies)
Course
Political Economy of Transition
Grade
1,5 (A)
Author
Year
2004
Pages
10
Catalog Number
V22202
ISBN (eBook)
9783638256100
File size
353 KB
Language
English
Tags
Poland, Political, Economy, Transition
Quote paper
Joanna Mastalerek (Author), 2004, Poland's competitiveness - worldwide and in the EU, Munich, GRIN Verlag, https://www.grin.com/document/22202

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