Sputtering into the future

There you have it: Even the World Bank joined the fray last week in warning the government that delaying privatization and failing to reform labor laws could condemn Poland to puny growth and escalating public debt for years to come. So much for the Belka plan. And so much for entering the European Union in 2004 with a dynamic, competitive economy. How tragic it is for Poland that the leadership it voted in just six months ago, while proclaiming EU membership to be its No. 1 policy goal, is in reality reversing years of crucial reform by pursuing a communist-era program of consolidating state-owned industries and parachuting in political pals to run them - meddling that will only make these monoliths weak and uncompetitive monopolies once Poland joins the EU. As Chris Hill of the World Bank's Polish office said last week, "Given the experience of the past 10-20 years, I think the experience of large state enterprises against enterprises in market hands show that economies get more out of market-based solutions." Lesson learned: A command economy doesn't work.

More tragic - and bizarre - is that no one within the Democratic Left Alliance (SLD) seems to mind that the actions of Treasury Minister Wiesław Kaczmarek are jeopardizing the party's - and Poland's - future. While Kaczmarek uses taxpayers' money to build an empire for himself and his cronies, Poland's reputation as a good place to invest erodes by the day. Kaczmarek's salty remark last week that the nation's remaining four state-owned banks ought to remain under government control because "The managements at foreign-owned banks make investment decisions that do not benefit the Polish economy" are more than embarrassing, they're discouraging the foreign direct investment Poland desperately needs to boost productivity and create jobs. For the record, foreign-run financial institutions, which employ thousands, paid billions of złotys in taxes last year, according to the Finance Ministry. So who's harming Poland's economy? Not foreign business interests. Ministers like Kaczmarek need to stop blaming foreigners and past government policies for their ineptitude at solving Poland's problems and start courting investment, both foreign and domestic.

But while that may be too much to ask, there are still some reasons for cautious optimism within the SLD. Parliament is now kicking around a draft law on investment incentives that is intended to encourage companies like Toyota and PSA Peugeot Citroën to put more money into Poland, rather than flocking to more investor-friendly countries in the region. Toyota last week announced a E300 million ($261 million) investment to expand its Wałbrzych-based operations. That's a good sign but not nearly as good as the E1.5 billion factory Toyota and PSA decided to build in the Czech Republic - instead of here. Also, the government's new "Entrepreneurship First" program is a step in the right direction, although SLD needs to go much farther to create the conditions that will allow business to thrive long term. Lower taxes, reduced bureaucracy when setting up businesses, streamlining state institutions handling investment and living up to government commitments will all go a long way toward reviving Poland's economy and reducing unemployment. But the longer SLD sends out mixed signals by claiming to be pro-EU and pro-business while failing to implement meaningful reform - like restructuring tax-hogging industries - the longer it will take Poland to get there. Meanwhile, precious time is being lost.