INDUSTRIAL POLICY AND RESTRUCTURING

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INDUSTRIAL POLICY AND RESTRUCTURING Polish
case

• ETUC Summer School
• Kraków, 8.07.2005

Slawomir Adamczyk NSZZ Solidarnosc
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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

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Transformation of economy - main principles

• Establishing a legal framework
• Stability
• Liberalisation
• Structural reforms
• But
• Nothing about social dimention of the process

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Recovery of the economy
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Privatisation

• main tool for building market economy
• the best panacea for competitive challenges
• employment in private sector only 9 (1990),
  mainly in SMEs
• First time foreign employers present
• no solution for difficult sectors

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Employment in private sector ()
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Share of private sector in GDP ()
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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

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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

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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

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Restructuring of employment steel industry
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Restructuring of employment mining industry
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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

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Restructuring of employment - railways (PKP)
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Foreign Direct Investments in Poland
(accumulated, bln USD)
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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

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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

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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

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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)

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German FDI (accumulated) in 2002 structure of
outflowing ()
Source Gdansk Institute for Market Economics,
Deutsche Bundesbank
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Geographical directions of German investments in
2005 ()
Source Gdansk Institute for Market Economics,
survey of German Chamber of Trade and Industry
(DIHK)
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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

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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 MNCs, no possibility to carry on
  effective industrial policy
• There is a need for European sectoral approach

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And final remark

• There is no effective industrial policy without
  involvement of trade unions