INDUSTRIAL POLICY AND RESTRUCTURING – Polish case ETUC Summer School Kraków, 8.07.2005 Sławomir Adamczyk NSZZ Solidarność

INDUSTRIAL POLICY INDUSTRIAL POLICY AND RESTRUCTURING AND RESTRUCTURING

– Polish case– Polish case

ETUC Summer School ETUC Summer School

Kraków, 8.07.2005Kraków, 8.07.2005

Sławomir Adamczyk NSZZ Solidarność

INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASEINDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE

Starting point -1989 Starting point -1989 political freedom but also a political freedom but also a collapse of „old” economic collapse of „old” economic systemsystem

• Inflation – 389%Inflation – 389%

• GDP decline – 10,5%GDP decline – 10,5%

• Real wage decline – 24%Real wage decline – 24%

urgency for comprehensive urgency for comprehensive transformation of the transformation of the

systemsystem


Transformation of economy Transformation of economy - main principles- main principles

• Establishing a legal frameworkEstablishing a legal framework

• StabilityStability

• LiberalisationLiberalisation

• Structural reformsStructural reforms

But…But…

Nothing about social dimention of the Nothing about social dimention of the processprocess


Recovery of the economyRecovery of the economy

0

50

100

150

200

250

300

350

400

1990 1992 1994

Inflation (%)

-12

-10

-8

-6

-4

-2

0

2

4

6

1990 1992 1994

GDP growth (%)

-25

-20

-15

-10

-5

0

5

1990 1992 1994

Real wage (%)


PrivatisationPrivatisation

• main tool for building market economymain tool for building market economy

• the best „panacea” for competitive the best „panacea” for competitive challengeschallenges

• employment in private sector only 9% employment in private sector only 9% (1990), mainly in SME’s(1990), mainly in SME’s

• First time foreign employers presentFirst time foreign employers present

• no solution for „difficult sectors”no solution for „difficult sectors”


Employment in private sector Employment in private sector (%)(%)

0

10

20

30

40

50

60

70

80

1989 1990 1995 2001


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

0

10

20

30

40

50

60

70

80

1990 1995 2001


Industrial policy (1)Industrial policy (1)• Bad experiences with central-planned Bad experiences with central-planned

economyeconomy• Neoliberal approach (1990-93) – the best Neoliberal approach (1990-93) – the best

industrial policy is the lack of industrial industrial policy is the lack of industrial policypolicy

• Rising social costs of transformation – Rising social costs of transformation – necessity to take into account trade necessity to take into account trade unions’ demandsunions’ demands

• 1994 – first social agreement at national 1994 – first social agreement at national level on privatisation issueslevel on privatisation issues


Industrial policy (2)Industrial policy (2)

• 1994 – Poland associated with EC1994 – Poland associated with EC• 1997 – opening of the accession 1997 – opening of the accession

negotiationsnegotiations• On this occasion Polish industrial policy On this occasion Polish industrial policy

is formulatedis formulated• Horizontal policy vs structural Horizontal policy vs structural

dimentiondimention• Sectoral policy as an instrument for Sectoral policy as an instrument for

restructuringrestructuring


Restructuring of „difficult” Restructuring of „difficult” sectorssectors

• Based on agreements between trade Based on agreements between trade unions, government and employersunions, government and employers

• Voluntary reduction of employmentVoluntary reduction of employment

• Different tools for social protection Different tools for social protection and activation on the labour market and activation on the labour market were usedwere used

• Preventing exclusion from labour Preventing exclusion from labour market as a main goalmarket as a main goal


Restructuring of employment Restructuring of employment – steel industry– steel industry

0

20

40

60

80

100

120

140

160

Thousands

1990 1992 1995 2003


Restructuring of employment Restructuring of employment – mining industry– mining industry

0

50

100

150

200

250

300

350

400

Thousands

1990 1992 1995 2003


Restructuring of mining Restructuring of mining -comparison-comparison

• British mining industry British mining industry

16 years (1983-1999) 16 years (1983-1999)

- 235 000 workplaces reduced- 235 000 workplaces reduced

• Polish mining industry Polish mining industry

13 years (1990-2003)13 years (1990-2003)

- 260 000 workplaces reduced- 260 000 workplaces reduced


Restructuring of employment Restructuring of employment - railways (PKP)- railways (PKP)

0

50

100

150

200

250

300

350

Thousands

1991 1995 2003


Foreign Direct Investments Foreign Direct Investments in Poland in Poland (accumulated, bln USD)(accumulated, bln USD)

0

10

20

30

40

50

60

70

80

90

1989 1993 1997 2001 2004


Foreign companies in Polish Foreign companies in Polish economyeconomy

• 2001 – 11,5% GDP in private sector2001 – 11,5% GDP in private sector

• Share of employment in private sector:Share of employment in private sector:

1995 – 2,8%1995 – 2,8%

2001 – 5,7%2001 – 5,7%

• Main sectors: metal, banking, chemical Main sectors: metal, banking, chemical industry, food processing industryindustry, food processing industry


Foreign investors – case of Foreign investors – case of Philips:Philips:

• Global electronic competitorGlobal electronic competitor

• 167 000 empl. in 150 factories around the 167 000 empl. in 150 factories around the worldworld

• Poland - 6 700 employers in 6 factoriesPoland - 6 700 employers in 6 factories

• European Centre of Lighting and European European Centre of Lighting and European Accounting Centre (in the process of Accounting Centre (in the process of development)development)

• Average annual export volume = annual Average annual export volume = annual export volume of entire coal mining export volume of entire coal mining industry = 1 billion USDindustry = 1 billion USD


Multinationals and industrial Multinationals and industrial policypolicy• Some sectors dominated by MNCsSome sectors dominated by MNCs

• Introducing new technologies and Introducing new technologies and innovative approach are advantageous for innovative approach are advantageous for sectoral competitivity, but…sectoral competitivity, but…

• Reluctance to participate in sectoral Reluctance to participate in sectoral dialoguedialogue

• Lobbing used in order to put pressure on Lobbing used in order to put pressure on the governmentthe government

• Public interest often not compatible with Public interest often not compatible with the global strategy of MNCsthe global strategy of MNCs


Relocation – what does it mean Relocation – what does it mean in Poland?in Poland?

• Moving production within Europe - Moving production within Europe - opportunity for increasing opportunity for increasing competitiveness of the entire regioncompetitiveness of the entire region (but (but social standards should be protected)social standards should be protected)

• Main threat – delocalisation outside Main threat – delocalisation outside Europe (e.g. textile industry in Poland)Europe (e.g. textile industry in Poland)

• Positive attitude - moving investments Positive attitude - moving investments from outside Europe (e.g. Goodyear, 3M)from outside Europe (e.g. Goodyear, 3M)


German FDI (accumulated) in German FDI (accumulated) in 2002 2002 structure of outflowing (%)structure of outflowing (%)

0

10

20

30

40

50

60

Poland CEE EU-15 USA

Source: Gdańsk Institute for Market Economics, Deutsche Source: Gdańsk Institute for Market Economics, Deutsche BundesbankBundesbank


Geographical directions of Geographical directions of German investments in 2005 German investments in 2005 (%)(%)

Others

Asia (excl. China)

South America

Russia, Ukr., South-East

Eur.

EU-15

China

EU-10

0 10 20 30 40 50Source: Gdańsk Institute for Market Economics, Source: Gdańsk Institute for Market Economics, survey of German Chamber of Trade and Industry survey of German Chamber of Trade and Industry (DIHK)(DIHK)


Attraction of investments Attraction of investments from outside Europe from outside Europe - - case 3M (Minnesota, Mining& case 3M (Minnesota, Mining& Manufacturing)Manufacturing)

• American based „conglomerate” MNCAmerican based „conglomerate” MNC

• 75 000 employees, 44 plants75 000 employees, 44 plants

• Medical tapes division is to be moved to Medical tapes division is to be moved to Poland from France… but also from Japan Poland from France… but also from Japan and USAand USA

• As a result Europe will became worldwide As a result Europe will became worldwide leader in this brandleader in this brand


ConclusionsConclusions• Transformation in Poland: macro-economic Transformation in Poland: macro-economic

stability achieved but privatisation too chaoticstability achieved but privatisation too chaotic

• Industrial policy not introduced in the Industrial policy not introduced in the beginning, enforced by trade unions and EU beginning, enforced by trade unions and EU integrationintegration

• Useful tool for sectoral restructuringUseful tool for sectoral restructuring

• But after privatisation a lot of sectors are But after privatisation a lot of sectors are controlled by MNC’s, no possibility to carry on controlled by MNC’s, no possibility to carry on effective industrial policyeffective industrial policy

• There is a need for European sectoral There is a need for European sectoral approach approach


And final remarkAnd final remark

There is no effective There is no effective industrial policy without industrial policy without

involvement of trade involvement of trade unionsunions

Documents

INDUSTRIAL POLICY AND RESTRUCTURING – Polish case ETUC Summer School Kraków, 8.07.2005 Sławomir Adamczyk NSZZ Solidarność