Hubner: "There are some reasons for optimism"
A self-described "academic, not a politician," she graduated from the Warsaw School of Economics in international relations and she still holds a professorship there. Hubner spent two years at the University of California, Berkeley, where she worked closely with Laura Tyson, who is now chief economic adviser to U.S. President Clinton. Last month, Poland became the first country in Central Europe to adopt an official policy on small- and medium-sized enterprises (SMEs). The document was prepared under Hubner's supervision and recognizes the importance of the entrepreneurial sector in the country's economic future. The deputy minister discussed the policy, its commitment to remove legal, financial and bureaucratic barriers to the formation of SMEs, and the role of SMEs in the economy, with Warsaw Business Journal reporter Joe Myerson.
Q: How would you describe the significance of the SME policy and the importance of small- and medium-sized enterprises to the Polish economy?
A: This sector was the most successful in the transformation in the 1990s, because (it) developed enormously and spontaneously during those first years of the transformation. More than two million SMEs were established then, and the time has come for the government to create a stable environment for further development. This is the most rapidly developing sector and the sector which is responsible for the absorption of the unemployment (from) the restructuring of traditional industries in Poland. (But) the time of spontaneous development is gone and now we have to create favorable conditions for further development through government policy.
Q: Have you started work on the policy, and how are you coordinating that work with other ministries?
A: The Ministry of Industry and Trade is the coordinating body of the policy, which also means that it is responsible for monitoring how the policy is being implemented.
In July a task force will start its work on SME policy. And then, from time to time, we will have a meeting and monitor the progress and deal with the problems.
Q: The ministries involved are Justice, Finance and your ministry. Are there any other ministries involved?
A: Agriculture and banks. And also there are administrative bodies, like the main office of tourism. They are very active now because development of tourism is important for this program on the regional and local level.
Q: Does the policy's goal of reforming the tax structure conflict with Minister Kolodko's goals of beefing up the revenue stream of the government, and could this interfere with the implementation of those sections of the policy?
A: Structural reform of the budget (as a whole) is a precondition to making any change in the tax structure and in the tax policy. (This) actually means making a structural reform to the pension (and) social security system. Without this reform there won't be much (chance) of diminishing tax burdens on enterprises. However, I think much can be done within existing tax policy to make things easier for SMEs. ... I cannot promise any change in taxation to ease the SMEs' fate, but we have to remember that within the industrial policy in Poland we have some instruments (giving) preferential tax treatment for enterprises which achieve a certain level of profitability and invest their profits. But it's a horizontal policy, so it is not anything special for SMEs.
Q: The policy mentions that the system of commercial registries in Poland is very confused. Has any progress been made in that regard at this time?
A: This issue will be solved with the new law on economic self-government. But the law has not been adopted yet. (Under the new law) the Ministry of Justice will (probably) have the central register office in Poland.
Q: You mentioned the economic self-government law. At least one version of it calls for mandatory membership in a chamber of commerce. As an economist, do you prefer one of these systems over another?
A: As a private economist, I'm against anything which is mandatory in general, so I would rather support the system which is not mandatory for SMEs. But if you listen to what the SME organizations are saying, there are many of them which want the system to work as a mandatory system, because that guarantees the inflow of membership fees which make the activities of the organizations possible.
Q: A number of countries in the West have mandatory systems.
A: Germany has a mandatory system, and pre-war Austria. Our system is under their influence to a large extent.
Q: Some business groups have voiced a bit of skepticism that this policy will produce real change. What do you think?
A: There are some reasons for optimism. We have to report to the Council of Ministers every year.
We have (also) created the Polish Foundation for Development and Promotion of SMEs, which has a council. And many organizations of SMEs are present. ... So we will always be under a sort of monitoring and pressing from the SMEs' organization. Also, I think the people we managed to attract to the preparation of the program and to the implementation are very enthusiastic. This is also a guarantee that the right people in the right place will make it possible.
Q: You mentioned the foundation. How much money does it have at its disposal?
A: The foundation has money through this year, from the European Union's PHARE program, $2.1 million. But for years to come we will need money. And there were some declarations from some donors, like USAID, which has expressed a will to support the foundation and which has provided technical assistance for the ministry. Also other foreign donors, including the Know-How Fund (funded by the United Kingdom), have also pledged support for the foundation.
Q: I understand that USAID and its Gemini program were very helpful in developing the policy.
A: Yes, they were very, very instrumental. I had a trip to Washington in April which was organized by USAID, just to see the American experience and I was in different institutions that deal with SMEs. I met the president of USAID and I talked to many people within USAID and I met many people within the Small Business Administration and I was in the procurement office also talking about SMEs' position in the procurement system. And I was also in the House of Representatives and the Senate, in the small business committees, listening to hearings there. And I was at two banks which grant credits to SMEs with state guarantees, so I know how this system works. It was a very educational trip.
Q: You mention banks and special credits for SMEs. How will that system work?
A: Last year we got the first of money for state guarantees for SMEs, allocated in the BGK bank (Bank Gospodarstwa Krajowego). ... The first amount was zl. 20 million ($8.5 million), so this year it will be zl. 25 million ($10.7 million), and zl. 30 million ($12.8 million) the (following) year. This is the top (layer) of the system. Then the (BGK) bank has agreements with local banks, which are closer to SMEs, and we are working to prepare a system of local guarantee schemes and mutual guarantee schemes. These are programs we are running under the $2.1 million allocated by the European Union. We are also discussing the establishment of the first regional investment fund, which will be for the assistance of SMEs also, with the assistance of the World Bank credit. And we are also hoping to have some money from PHARE for this first regional fund.
Q: And how much money is involved in this fund?
A: The World Bank suggested about $100 million, because we want to have a pilot program, a small one, to see how it works.
Q: And where would this be set up?
A: I'm talking to the regional agency in Silesia, in Katowice. I think it would be a good idea to have it there.
Q: How would small businesses get into this program?
A: In my opinion, the best place for SMEs to get information is the local environment, so we want to develop this local and regional information system, just to decrease the need to go to Warsaw just to get information.
Q: Are businesses clamoring to get involved?
A: Yes. Mainly representatives of local and regional organizations are coming to the foundation or they are coming here to get information. They've heard about the foundation and about the new policy and they are just trying to get involved. The foundation has a council of 10 members, but there are many people and institutions that also want to become members of the council, so maybe we will create some bigger forum, for a dialog between the government and the SME representatives.
Q: All of this is fine for small businesses, but what about those that are a little bigger?
A: The problem with small businesses is some of them will never grow, because they should stay small. Of course, by growing they get more independent. But my intention is to concentrate on those smaller and weaker businesses, to give them a chance to grow.
Q: How would you describe the significance of the SME policy and the importance of small- and medium-sized enterprises to the Polish economy?
A: This sector was the most successful in the transformation in the 1990s, because (it) developed enormously and spontaneously during those first years of the transformation. More than two million SMEs were established then, and the time has come for the government to create a stable environment for further development. This is the most rapidly developing sector and the sector which is responsible for the absorption of the unemployment (from) the restructuring of traditional industries in Poland. (But) the time of spontaneous development is gone and now we have to create favorable conditions for further development through government policy.
Q: Have you started work on the policy, and how are you coordinating that work with other ministries?
A: The Ministry of Industry and Trade is the coordinating body of the policy, which also means that it is responsible for monitoring how the policy is being implemented.
In July a task force will start its work on SME policy. And then, from time to time, we will have a meeting and monitor the progress and deal with the problems.
Q: The ministries involved are Justice, Finance and your ministry. Are there any other ministries involved?
A: Agriculture and banks. And also there are administrative bodies, like the main office of tourism. They are very active now because development of tourism is important for this program on the regional and local level.
Q: Does the policy's goal of reforming the tax structure conflict with Minister Kolodko's goals of beefing up the revenue stream of the government, and could this interfere with the implementation of those sections of the policy?
A: Structural reform of the budget (as a whole) is a precondition to making any change in the tax structure and in the tax policy. (This) actually means making a structural reform to the pension (and) social security system. Without this reform there won't be much (chance) of diminishing tax burdens on enterprises. However, I think much can be done within existing tax policy to make things easier for SMEs. ... I cannot promise any change in taxation to ease the SMEs' fate, but we have to remember that within the industrial policy in Poland we have some instruments (giving) preferential tax treatment for enterprises which achieve a certain level of profitability and invest their profits. But it's a horizontal policy, so it is not anything special for SMEs.
Q: The policy mentions that the system of commercial registries in Poland is very confused. Has any progress been made in that regard at this time?
A: This issue will be solved with the new law on economic self-government. But the law has not been adopted yet. (Under the new law) the Ministry of Justice will (probably) have the central register office in Poland.
Q: You mentioned the economic self-government law. At least one version of it calls for mandatory membership in a chamber of commerce. As an economist, do you prefer one of these systems over another?
A: As a private economist, I'm against anything which is mandatory in general, so I would rather support the system which is not mandatory for SMEs. But if you listen to what the SME organizations are saying, there are many of them which want the system to work as a mandatory system, because that guarantees the inflow of membership fees which make the activities of the organizations possible.
Q: A number of countries in the West have mandatory systems.
A: Germany has a mandatory system, and pre-war Austria. Our system is under their influence to a large extent.
Q: Some business groups have voiced a bit of skepticism that this policy will produce real change. What do you think?
A: There are some reasons for optimism. We have to report to the Council of Ministers every year.
We have (also) created the Polish Foundation for Development and Promotion of SMEs, which has a council. And many organizations of SMEs are present. ... So we will always be under a sort of monitoring and pressing from the SMEs' organization. Also, I think the people we managed to attract to the preparation of the program and to the implementation are very enthusiastic. This is also a guarantee that the right people in the right place will make it possible.
Q: You mentioned the foundation. How much money does it have at its disposal?
A: The foundation has money through this year, from the European Union's PHARE program, $2.1 million. But for years to come we will need money. And there were some declarations from some donors, like USAID, which has expressed a will to support the foundation and which has provided technical assistance for the ministry. Also other foreign donors, including the Know-How Fund (funded by the United Kingdom), have also pledged support for the foundation.
Q: I understand that USAID and its Gemini program were very helpful in developing the policy.
A: Yes, they were very, very instrumental. I had a trip to Washington in April which was organized by USAID, just to see the American experience and I was in different institutions that deal with SMEs. I met the president of USAID and I talked to many people within USAID and I met many people within the Small Business Administration and I was in the procurement office also talking about SMEs' position in the procurement system. And I was also in the House of Representatives and the Senate, in the small business committees, listening to hearings there. And I was at two banks which grant credits to SMEs with state guarantees, so I know how this system works. It was a very educational trip.
Q: You mention banks and special credits for SMEs. How will that system work?
A: Last year we got the first of money for state guarantees for SMEs, allocated in the BGK bank (Bank Gospodarstwa Krajowego). ... The first amount was zl. 20 million ($8.5 million), so this year it will be zl. 25 million ($10.7 million), and zl. 30 million ($12.8 million) the (following) year. This is the top (layer) of the system. Then the (BGK) bank has agreements with local banks, which are closer to SMEs, and we are working to prepare a system of local guarantee schemes and mutual guarantee schemes. These are programs we are running under the $2.1 million allocated by the European Union. We are also discussing the establishment of the first regional investment fund, which will be for the assistance of SMEs also, with the assistance of the World Bank credit. And we are also hoping to have some money from PHARE for this first regional fund.
Q: And how much money is involved in this fund?
A: The World Bank suggested about $100 million, because we want to have a pilot program, a small one, to see how it works.
Q: And where would this be set up?
A: I'm talking to the regional agency in Silesia, in Katowice. I think it would be a good idea to have it there.
Q: How would small businesses get into this program?
A: In my opinion, the best place for SMEs to get information is the local environment, so we want to develop this local and regional information system, just to decrease the need to go to Warsaw just to get information.
Q: Are businesses clamoring to get involved?
A: Yes. Mainly representatives of local and regional organizations are coming to the foundation or they are coming here to get information. They've heard about the foundation and about the new policy and they are just trying to get involved. The foundation has a council of 10 members, but there are many people and institutions that also want to become members of the council, so maybe we will create some bigger forum, for a dialog between the government and the SME representatives.
Q: All of this is fine for small businesses, but what about those that are a little bigger?
A: The problem with small businesses is some of them will never grow, because they should stay small. Of course, by growing they get more independent. But my intention is to concentrate on those smaller and weaker businesses, to give them a chance to grow.
