Studies Eastern European Markets
Eastern European Markets
Tauno Tiusanen - Stephen Kellens
Western companies in a successful transitional economy
Lappeenranta University of Technology. Studies in Industrial Engineering and Management. 2000, N:o 9.

    Some conclusions

    Poland´s transition to market economy is undoubtedly a success story. In the immediate post-communist slump in 1990-1991, the country experienced a one fifth decline of its GDP, but, after that, a new sustainable economic growth path has been found. In the growth scene, Poland has outperformed all of its post-communist neighbours.

    Even if the economy has been growing nicely in the 1990s, inflation figures have shown a clearly abating tendency. The crawling peg exchange rate regime has hindered a CA-crisis. However, at the turn of the century, the current account deficit is approaching a rather critical level.

    At the beginning of the 21st century, the prospects in the Polish economy are generally speaking bright. This does not mean that everything is in the best possible order and that an everlasting sustainable economic growth can be taken for granted. Poland has plenty of restructuring to do both in the agricultural sector and in some basic industries (e.g. mining).

    Public funds are badly needed in education and health care, while taxing people heavily under present living standards has its limits. Therefore, economic policy-making will remain delicate for many years to come.

    Amid strong economic growth, unemployment has remained reletively high. Many small farms, which provide a self-sufficient life for farming households, contains ´surplus labour´: obviously, many members of this community would take employment in the urban society, if jobs were available.

    From the point of view of potential Western investor, the labour market situation is favourable in general terms. The labour market is not thight, but free labour in skilled form is not necessarily easily available in regions of growth, like in Warsaw.

    The wage level (also in dollar terms) has lately increased very strongly. Nominal wages are pretty high in TE-comparison. Alongside with increasing paycheques, productivity has been advancing nicely. However, in unit labour cost, Hungary has a better record than Poland. Also the Czech Republic got a better mark in unit labour costs than Poland in 1999.

    In sum, Poland is an extremely positive case of transformation from plan to market. Therefore, hardly anybody dreams of the ´good old days´of communism in Polnd. This is not the same, say, in Russia, where there is still plenty of nostalgia toward the ´security´of the old system.

    According to the Polish Agency for Foreign Investment (PAIZ), more than half of FDIs in Poland in 1999 were greenfield projects. This fact hints clearly that privatisation, which is not an eternal project, is not the only route offered for foreign investors getting involved in the Polish economy. The dynamism of the Polish market offers plenty of oppurtunities for acquisition plus building up new capacities from scratch. Thus, the Polish market will remain an interesting topic for observation for a long period of time.

Dr. Tauno Tiusanen is Professor in the Department of Industrial Engineering and Management at Lappeenranta University of Technology, Finland. He is the author of numerous books on communist and post-communist economies. In the 1990s, he has monitored closely foreign direct investment development in transitional economies.

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