Gov't growth plan rapped
Pension funds in the dark on investment plans
Opposition politicians last week blasted the government's four-year blueprint to develop infrastructure and jump-start economic growth as unaffordable state largess while economists remained skeptical on long-term implementation. "(Finance Minister Marek Belka) is limited by his own statements that he won't increase budget debt so he tries to go around it through a system of state guarantees," said Janusz Jankowiak, head economist at BRE Bank. "It's just another way of implementing fiscal expansion." The Democratic Left Alliance-led (SLD) government last week offered up the economic stimulus package as official figures showed the economy slowing to 1.1% annual growth and unemployment rising. The package targets infrastructure development, boosting employment among young job seekers and cutting red tape for businesses. The package includes some zł. 180 billion ($44 billion) in spending on road and home construction over the next four years. All totaled, some 600 kilometers of new motorways, and 200 kilometers of expressways will be built through 2010 - the first stretches of pavement should be laid next year. The cash-strapped government is looking to private backers, notably the nation's pension funds, to fund a large portion of the project. But last week the funds, which receive mandatory contributions from the working population, seemed largely in the dark on such plans. "Until now, we haven't heard more than general statements from the government, so it's hard to comment," said Jarosław Jamka, head of the investment department at PTE ING Nationale-Nederlanden. "We'll invest only in assets that offer high interest and low risk. If that is the proposal of the government, we will certainly consider it." This scenario would require changes to current pension law, which restricts direct investment in government economic activities. "The government is indirectly pushing them into this area at the cost of allowing them to invest abroad," said Andrzej Myśliński, capital investment specialist at Bank Pekao. The strategy is already drawing fire from the government coalition's opposition in Parliament. "Either pension funds provide the highest possible profit for their customers, or they lend money to the government," said Zyta Gilowska, an MP with the opposition Civic Platform (PO) and co-chairman of the Sejm's public finance committee. "This proposal is like using the same money twice." The plan also calls for more home construction - looking for 140,000 new dwellings per year by 2004. Toward that end, the government proposed a program of long-term, fixed-rate mortgage loans to boost the nation's building industry, which has seen confidence dip to all-time lows in the Central Statistical Office's (GUS) business climate indices. Separately, the government, which projects gross domestic product growth at 1% this year, 3% in 2003 and 5% by 2004, says it will slash red tape for businesses in its "Entrepreneurship First" package, due to be approved by the cabinet this spring. Still, PO's Gilowska believes SLD's plan for economic revival misses the mark. "They did not include many stimulus (programs) in the budget proposal, and are defending many social benefits like subsidizing milk bars," she said, referring to the low-cost restaurants that are set to receive zł. 16.2 million ($3.95 million) under the 2002 budget. Criticism aside, analysts suggest the plan's toughest tests lie ahead. "Producing a program is one thing but translating it into action will be another," said Krzysztof Rybiński, chief economist at Bank Zachodni WBK (BZ WBK).
Opposition politicians last week blasted the government's four-year blueprint to develop infrastructure and jump-start economic growth as unaffordable state largess while economists remained skeptical on long-term implementation. "(Finance Minister Marek Belka) is limited by his own statements that he won't increase budget debt so he tries to go around it through a system of state guarantees," said Janusz Jankowiak, head economist at BRE Bank. "It's just another way of implementing fiscal expansion." The Democratic Left Alliance-led (SLD) government last week offered up the economic stimulus package as official figures showed the economy slowing to 1.1% annual growth and unemployment rising. The package targets infrastructure development, boosting employment among young job seekers and cutting red tape for businesses. The package includes some zł. 180 billion ($44 billion) in spending on road and home construction over the next four years. All totaled, some 600 kilometers of new motorways, and 200 kilometers of expressways will be built through 2010 - the first stretches of pavement should be laid next year. The cash-strapped government is looking to private backers, notably the nation's pension funds, to fund a large portion of the project. But last week the funds, which receive mandatory contributions from the working population, seemed largely in the dark on such plans. "Until now, we haven't heard more than general statements from the government, so it's hard to comment," said Jarosław Jamka, head of the investment department at PTE ING Nationale-Nederlanden. "We'll invest only in assets that offer high interest and low risk. If that is the proposal of the government, we will certainly consider it." This scenario would require changes to current pension law, which restricts direct investment in government economic activities. "The government is indirectly pushing them into this area at the cost of allowing them to invest abroad," said Andrzej Myśliński, capital investment specialist at Bank Pekao. The strategy is already drawing fire from the government coalition's opposition in Parliament. "Either pension funds provide the highest possible profit for their customers, or they lend money to the government," said Zyta Gilowska, an MP with the opposition Civic Platform (PO) and co-chairman of the Sejm's public finance committee. "This proposal is like using the same money twice." The plan also calls for more home construction - looking for 140,000 new dwellings per year by 2004. Toward that end, the government proposed a program of long-term, fixed-rate mortgage loans to boost the nation's building industry, which has seen confidence dip to all-time lows in the Central Statistical Office's (GUS) business climate indices. Separately, the government, which projects gross domestic product growth at 1% this year, 3% in 2003 and 5% by 2004, says it will slash red tape for businesses in its "Entrepreneurship First" package, due to be approved by the cabinet this spring. Still, PO's Gilowska believes SLD's plan for economic revival misses the mark. "They did not include many stimulus (programs) in the budget proposal, and are defending many social benefits like subsidizing milk bars," she said, referring to the low-cost restaurants that are set to receive zł. 16.2 million ($3.95 million) under the 2002 budget. Criticism aside, analysts suggest the plan's toughest tests lie ahead. "Producing a program is one thing but translating it into action will be another," said Krzysztof Rybiński, chief economist at Bank Zachodni WBK (BZ WBK).
