Green issues hamper investor confidence
As one of Europe's top emerging markets, Poland's attraction as a destination for investors is without question. But like all developing markets, problems still exist that hinder investor confidence and one that looms large in the minds of anyone setting up in Poland are the country's messy environmental laws.
The legal quagmire stems from a combination of rapidly changing laws and official indecision with the result that investors have a difficult time wading through the endless bureaucratic procedures before even starting their business. "It happens sometimes that it (the investment process) ends up with nothing," especially when it comes to small firms, said Jan Rajtar, vice president of Eko-Efekt, an environmental consulting company. Sometimes potential investors simply give up investing in a particular area if faced with too many obstacles.
It's not all bad news, of course. Polish environmental legislation is changing rapidly, said Chris Moore, managing director of WS Atkins Polska. And not surprisingly, there's an urgent need for laws to be changed, especially considering the country's hopes of joining the European Union (EU). "By 2003, seven to eight laws that are in accordance with EU directives should be passed," said Jerzy Kollajtis, president of ERM Polska.
In addition, more than 150 executive laws are expected to be adopted in that time. But before the new laws are implemented, the interim period will continue to hurt investors and companies whose business is environmental consulting.
A drawback to this transitory period is the requirement for companies to undergo a "social consultation" before being permitted to make an investment, Kollajtis said. Unfortunately, though, the term social consultation has not yet been defined by law and therefore companies don't know with whom and about what they are supposed to consult.
Moreover, environmental organizations have an enormous influence over sensitive environmental issues and often refuse to compromise their positions, according to Kollajtis. "The majority of ecologists act emotionally rather than rationally; that's why they're not willing to compromise," he said. Since the law states that an agreement between an investor and "society" or NGO (Non-Government Organization) is essential before an investment can take place, environmental awareness needs to be developed among NGOs as "only a small part of them acts on a solid scientific basis," Kollajtis said. Also, not many people understand that investments, are generally a positive factor, one source said. "We'll paint ourselves into a corner," Kollajtis said, explaining that legislation may be nicely painted, but there won't be any possibility of implementing it with regard to the social consultation.
Moreover, administrative reforms completed in early 1999 have only added, at least temporarily, to the woes of potential investors by splitting up the agencies that previously gave them permission to go ahead with their investments. These days, much of the permission granted is done through local government.
"Until 1999 all the documents were agreed on by the voivodships," said Anna Mihulka, director of Atmoterm.
Other problems involve local officials, most of whom need to be able to deal effectively with the various bureaucracies but have not received adequate training in their new field, Kollajtis said. So while officials in some counties are very cooperative, in others there seems to be no end to the approval process. The Mazowieckie voivodship is the worst, said Mihulka, adding that the city of Grojec is an exception.
One particular headache for investors is the waiting time involved for decisions to be made. Officials tend to play safe and hedge their bets, and sometimes this means endless delays with serious disadvantages for investors, Kollajtis said. "A few years ago permission for making scientific bores was given after five and a half months. If the investor had not already owned the land, he would have gone somewhere else," Kollajtis said. But, he said, things are improving, and "from one decision to the next, the authorities are becoming better and better."
But there are still time-consuming problems that slow down investment. After following all the procedures at a local council, other issues can suddenly crop up that can make life almost impossible for investors hoping to move ahead with their projects.
