Impact of Foreign Trade and Foreign Direct Investment on the Competitiveness of the Polish Economy s

1
Impact of Foreign Trade and Foreign Direct
Investment on the Competitivenessof the Polish
Economy (some comparisons with other CEE
countriesCzech Republic, Hungary and Slovak
Republic)
Ministry of Economy Poland

• Zofia Wysokinska

Bratislava, 23 November 2005
2
Introduction

• The aim of the paper is to compare
• macro- and micro- determinants shaping the
  competitive business environment in CEE
  countries with special reference to foreign
  trade and foreign direct investment
• effects of the internationalization and
  modernization processes with special reference
  to structural changes in foreign trade, FDI and
  GDP formation
• impact on the competitiveness in the
  international market.

3
1. Structural adjustments in foreign tradeof CEE
countries

• In the 1990s
• implementing of policies of fundamental
  reorientation in foreign trade,
• shifting the direction from the East (the former
  SU and satellite countries) to the West
  (primarily the EU).
• economic transformation and integration with the
  EU has been established
• the CEE countries have fully opened their
  capital market for FDI and portfolio investment
  flows.

4
cont. 1.Structural adjustments in foreign
tradeof CEE countries
During the recent decade 1993-2004 there are
observed following trends in the examined CEEs

• the total export in Poland, Czech Republic, and
  Slovakia increased more than 5 times and in
  Hungary more than 6 times,
• the total import in Poland and Slovakia increased
  almost 5 times and in Czech Republic more than
  5 times,
• the share of sensitive products export of (coal,
  steel, textiles and agriculture products) from
  the CEE countries to the EU was deeply reduced.

5
cont. 1. Structural adjustments in foreign
tradeof CEE countries

• The restructuring of the CEE countries economy
  and its growing competitiveness contributed to
  structural changes in their foreign trade.

6

• Table Structural adjustment in foreign trade
  according to factors endowment in CEE countries
  1995-2004 in

Source Own calculations based on
UN-COMTRADE-database. (based on Standard
International Trade Classification
SITC). Technical remarks Groups of products
calculated according to factors endowment I.
-resource intensive commodities
0(2-26)(3-35)456 II. -labour intensive
commodities 266-(626768)8-(8788) III.
-capital intensive commodities
1355355(626768)78 IV. -technology
intensive commodities easy to imitate
5152545758(59-593)(7576) V.
-technology intensive commodities difficult to
imitate 5937-(757678)(8788).
7
Structure of total foreign trade according to
factors endowment in Poland, Czech Republic,
Hungary and Slovakia (1995 2000 2004) in
(based on COMTRADE data base-UN) - own
calculations
8
Structure of total foreign trade according to
factors endowment in Poland, Czech Republic,
Hungary and Slovakia (1995 2000 2004) in
(based on COMTRADE data base-UN) - own
calculations
9
Structure of total foreign trade according to
factors endowment in Poland, Czech Republic,
Hungary and Slovakia (1995 2000 2004) in
(based on COMTRADE data base-UN) - own
calculations
10
Structure of total foreign trade according to
factors endowment in Poland, Czech Republic,
Hungary and Slovakia (1995 2000 2004) in
(based on COMTRADE data base-UN) - own
calculations
11
Structure of total foreign trade according to
factors endowment in Poland, Czech Republic,
Hungary and Slovakia (1995 2000 2004) in
(based on COMTRADE data base-UN) - own
calculations
12
2. Impact of FDI on Competitivenessof the Polish
Economy

• The economic growth in Poland caused a
  significant increase in the capital expenditure
  in the years 1990-2004
• The average capital expenditeure rate achieved
  20 per year.
• 1998 increased by 15.3,
• 1999 it was only 5.9
• 2000 1.4
• 2001 occurred (for the first time since 1991)
  a slip in the value (by 8.5)

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cont. 2. Impact of FDI on Competitivenessof the
Polish Economy

• The ratio of accumulated FDI capital as a
  percentage of GDP grew from 0.3 in 1991 to
  23,9 in 2002.
• The ratio of inward FDI to GDP grew
  systematically from 3.1 in 1991 to 5.9 in 2000
  
• The share of the annual FDI stream in gross fixed
  capital formation grew from 1.8 to 23.4.
  (UNCTAD 2002)

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cont. 2. Impact of FDI on Competitivenessin
Poland, Czech Republic, Hungary and Slovakia

• According to UNCTAD (WIR 2005) FDI stock in 2004
  exceeded (billion of USD) in
• Poland 61 Czech Republic 56
• Hungary 60 Slovakia 14
• In 2004 value of FDI inflow in billion of USD
  to
• Poland exceeded 6 (the largest inflow since
  the year 2000)
• Czech Republic 4,4
• Hungary 4,1
• Slovakia 1,2
• Poland belongs to most attractive global business
  locations (UNCTAD, WIR-2005).

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cont. 2. Impact of FDI on Competitivenessof the
Polish Economy

• Branch structure of FDI inflow
• manufacturing about 40 of accumulated value of
  FDI
• services sector almost 60
• Comparison of shares of foreign affiliates in
  business RD in Poland, Czech Republic, Hungary
  and Slovakia gives the following results
• 62,5 in Hungary
• 46,6 in Czech Republic and
• 19 in Poland and also in Slovakia (WIR, 2005).

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cont. 3. Impact of FDI on Competitivenessof the
Polish Economy

• 2004 it was noticed in Poland the record high
  share of greenfield - 58 (with the increasing
  tendency from 91 greenfield projects in 2002,
  154-in 2003 and 230 in 2004)
• In the same period it was noticed
• in Czech Republic 94 greenfield projects in 2002,
  141- in 2003 and 136-in 2004
• in Hungary 210 greenfield projects in 2002, 213
  in 2003 and 211 in 2004
• in Slovakia 44 greenfield projects in 2002, 63
  in 2003 and 85-in 2004.

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cont. 2. Impact of FDI on Competitivenessof the
Polish Economy

• Percentage share of countries in the stock of FDI
  in Poland, as of December 31, 2004
• EU(15) 74
• USA 13,
• International 6,
• Others 7
• Impact of FDI on the labour market
• Almost 15,000 jobs created in 2004 by FDI
• FDI share in total employment amounted to about
  15

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3. Impact of FDI on the most Innovative Sectors
with special reference to Environmental Protection

• The growing share of FDI located in CEE countries
  in such a innovative sectors as environmental
  products and services.
• In the Polish case this share in total investment
  achieved in the year 2003 the level higher than
  41 with the increasing tendency starting from
  the year 2000 (Z. Wysokinska, Global Economy
  Journal, 2005).
• This impact was very positive and gives the
  result in improving the structure of all
  investment in the recent years in the direction
  to create more cleaner production.

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General evaluation

• The CEE countries
• achieved a high degree of macro-economic
  stability and
• recorded positive results of structural reforms
  during the transformation period
• have made progress in modernizing their
  institutional, legal and administrative
  environment,
• have achieved the positive impact of structural
  changes in foreign trade and FDI- inflow on the
  competitiveness of their economies

20
cont. General evaluation

• As a result of the twin processes of economic
  transformation and integration with the Western
  European structures, the CEE countries
• have already almost totally opened their
  economies to the flow of manufactured goods and
  products,
• fully opened the capital market for FDI and
  portfolio investment flows,
• nearly fully opened to flows of services,
• are significantly advanced in the step-by-step
  process of opening the foreign trade market to
  agricultural products.