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Success Stories Assistance Areas SEED Reports Contact Information Last updated: Thursday, 25-Jun-2009 16:23:56 EDT     1995 SEED ASSISTANCE SUMMARY 1995 Program Overview Poland is a country of "firsts". Four years ago, Poland was the first Central and Eastern European (CEE) country to commit itself to a free market economy and the accompanying democratic and economic reforms. By the end of 1993, it was the first country in the region that demonstrated unmistakable signs of sustained economic recovery with impressive growth in excess of 4%. Poland has also become the first former centrally-planned economy to end its recession and return to growth with its democracy intact. The SEED Program has provided the foundation for these successes through its promotion of privatization and financial sector reform, and support for democratic processes and local government. With USAID assistance, Poland has seen an impressive increase in privately owned businesses (now producing over half of Poland's GDP), greater competition within the banking sector, the introduction of profitable and environmentally-friendly technologies, and an improved policy climate. SEED has also further strengthened democracy in Poland through its focus on the role of local governments, civil society, independent media, and modernizing and updating the analytical and research capabilities of the legislative branch of the Polish government. The success of SEED has influenced a rethinking of Program direction. As various activities achieve their objectives, the Program concentrates it efforts on the outstanding objectives. In the remaining years of the SEED Program, USAID will focus on the engines which allow Poland to continue its spectacular growth: private sector development, the private financial sector, and local government. The USAID/Poland program focuses on SEED's three overarching goals: economic restructuring, democratic development and improving the quality of life. The following strategic objectives support those goals: Stimulating Private Sector Development by strengthening the entrepreneurial skills of small business owners, establishing small business credit programs, and promoting policy reform. Developing a Competitive, Private Financial Sector by promoting privatization of state-owned commercial banks, policy reform, and assisting financial institutions to meet international standards thus improving the capital market's functioning. Promoting Sustainable Use of Natural Resources through the rationalization of energy consumption, the gradual privatization of most of the energy sector (energy technology and profitability), and pollution prevention (natural resources). Assisting in Developing Laws and Legal Institutions that Support Democratic Processes by strengthening the Polish parliament's research and analysis capabilities. Strengthening Local Governments by supporting municipal associations and promoting task based budgeting. Promoting the Active Participation of Citizens and Non-Governmental Organizations by supporting civic education, intra-sectoral cooperation among NGOs, and labor management negotiations. Promoting the Open Flow of Information by strengthening independent media. Improving the Sustainability of Social Benefits and Services by strengthening local government capacity to provide health service delivery at the local/regional level. As of September 30, 1995, the U.S. has contributed approximately $800.1 million in assistance to Poland, including approximately $81.5 million in FY 95. Program Impact Poland's SEED Program has been very successful, leading to the achievement of two strategic objectives: assisting in developing laws and legal institutions that support democratic processes and promoting the open flow of information. As Poland's SEED Program continues to mature, the strategy will be revised to focus more closely on the areas of private sector development, the private financial sector, and local government. Economic Growth: The Polish economy expanded by 5% in 1994, with the private sector accounting for over 56 % of GDP. Private sector industrial output rose by 23 %, while that of State enterprises expanded by 6%. Because Poland is the largest CEE State, its economy has a vast effect on the region. With U.S. assistance, Poland will continue leading the way to a free-market economy by expanding the private sector, strengthening financial markets and increasing energy sector economic performance. Privatization: With the Economic Activity Act of 1988, private economic activity became legal. This has led to over two million sole proprietorships and some 70,000 private incorporated enterprises. Within this sector, training continues to be among the biggest needs. USAID provided direct help to 658 small businesses to develop business plans, as well as to improve their marketing and overall enterprise management. Polish capacity to train entrepreneurs in needed business has been strengthened by the establishment of seven Polish management training institutions which deliver training to private business executives. To help new small businesses acquire the financing needed for business expansion, USAID has helped create a special small business credit program through the Polish America Enterprise Fund, which has now consolidated with a Polish bank. USAID has also contributed to revisions of Poland's commercial code, tax administration, public procurement, and bankruptcy provisions to meet current international practice. The May, 1995 Law and Democracy Presidential Initiative provides Department of Justice expertise in the review, drafting, and implementation of criminal justice programs and training for prosecutors and judges. Financial Sector: Notable progress was made in the past six months in fostering greater competition within the banking sector with three out of nine state-owned commercial banks being privatized. Additionally, the Central Bank has approved five additional foreign banks to operate in Poland, thereby increasing pressure on Polish banks to offer competitive services. Prices on the Warsaw Stock Exchange, with over 60 companies now listed, stabilized in 1995. The PKO, along with four other banks, has joined the Mortgage Fund. The surety and safety of the banking system were considerably enhanced by the February, 1995 creation of a new bank guarantee fund which ensures small depositors against loss in the case of a bank failure. The Central Bank's supervision capabilities were strengthened and the Warsaw Institute of Banking now offers bank training courses without the use of external instructors. Also contributing to the move toward bank privatization, the Polish National Securities Depository, with the help of substantial USAID technical assistance, now meets international standards for securities clearance and settlement, and independence. Energy Technology and Profitability: Significant improvements in this sector have been achieved through the introduction of new, environmentally-friendly technologies, energy consumption/use rationalization, increased energy sector economic performance, and a stable, concise energy policy. USAID assistance implementors (Electrotec, Bechtel, USEA, and Hagler Bailly) have helped develop the Energy Law, Energy Policy 2010, and secondary legislation. The Energy Policy calls for the rationalization of energy consumption, the gradual privatization of most of the sector, the adjustment of energy prices to EU requirements and the minimization of environmental pollution. In addition, Electrotec's model electric distribution plan will be replicated through the whole country and USEA provided a variety of technical assistance and training in improved operational, managerial, and financial mechanisms. USAID also contributed to the preparation of World Bank transmission and distribution sector loans totalling $250 million. Next Steps: Mature Poland SEED activities will continue in the areas of privatization and finance. The loan guarantee program will expand, collateral law passage is anticipated, small equity investments will surge, and the systematic gathering of data on the performance of the small business sector will form the basis of policy development. Two to three more state-owned banks will be privatized, bank supervision will continue to improve, and the percentage of housing constructed by the private sector will increase to over 60%. Energy technology and profitability activities will be refocused to emphasize their contributions to the private sector and local government. Democracy: Democracy in Poland has developed rapidly. Free and fair elections take place, citizen and minority rights are guaranteed and the necessary laws and legal institutions to support democratic processes are in place. Local governments have assumed greater and greater responsibility as has the NGO sector, growing from less that 50 organizations to over 12,000 within a ten year period. In addition, Poland now boasts more that 1,000 independent newspapers and periodicals with national, regional, or local circulation. Remaining problems in the sector include the insufficient capacity of the judicial system to handle increased organized and violent crime, unfunded mandates at the local government level, the need for greater public visibility of NGOs, and Government attempts to influence the press. Democratic Processes: Through the U.S. Library of Congress, USAID assisted the Polish parliament develop independent, effective research and analysis offices. Not only will Polish parliamentarians have greater access to information from the United States and throughout the region, but their information system will be able to support greater use and inquiries from outside users interested in learning more about the work of the Polish parliament. Local Governments: Currently between 30-50% of local government revenues are self generated, primarily through property taxes and user fees. Recognizing the importance of strong local government in a democracy, USAID has concentrated on public administration activities, and housing and urban development. As a result, municipal associations have been strengthened, task-based budgeting is being disseminated throughout the country, and a $50 million loan from the World Bank and a $4.0 million ECU grant have been leveraged for infrastructure. In addition, gmina lobbying has improved, which led to changes in the housing allowance law to more fairly reflect the differences among gminas in their housing stock and burden. Citizen and NGO Participation: The number of NGOs in Poland has increased dramatically with most needing technical assistance and training to strengthen their institutions and successfully raise funds to support their activities. In response, USAID has provided training to 100 ecological NGOs. USAID is also supporting the Free Trade Union Institute which has helped to establish 13 Bureaus of Consultation and Negotiation. These Bureaus are providing factory commissions with the economic and legal expertise necessary in labor-management negotiations. The presentation of an amendment which would increase NGO reporting responsibilities and limit their economic activities except in the area of education has increased awareness within the NGO sector of the need for improved intra-sectoral cooperation, more effective lobbying and improved information about NGOs among citizens. USAID has been working with leading Polish NGOs to accomplish these goals. Through a grant to USIA, civic education and economics courses are being taught in over 60 primary/secondary schools. Information: Access to information is not limited in Poland and several international news agencies offer their services to Polish newspapers. Public TV/Radio are successful in the difficult task of maintaining full programmatic independence from the government that subsidized them. The Government is however, trying to influence the press. A proposed Press Law would create a new national body to indirectly control the press. The proposed Law is being strongly contested. A second challenge is the absence of effective university-level educational opportunities in journalism and media studies. However, USAID continues to provide assistance to strengthen the capacity of the Warsaw Journalism Center (WJC) to meet the needs of the media sector in Poland through training seminars, courses for the professional media community, and the establishment of a practical two year training program. Next Steps: Mature Poland SEED activities will continue in the area of local government. Local government activities will focus on gminas; specifically, increasing their internal capacity, strengthening their financial and legal authority, increasing citizen involvement, improving service delivery, developing capital budgeting and planning capacity, and increasing self generated revenues. The maturity of Poland's democracy allows USAID to graduate the democratic processes strategic objective however, given the fact that judges are loosely organized and lack a strong voice in the development of their profession, USAID will continue to support Polish judicial reform through Iustitia, a small, national organization of Polish judges. The strength of the Polish media allow USAID to graduate the information strategic objective, also. WJC will reach self-sustainability in 1998, assuring the continued professional growth of the Polish media. Support for civic participation and NGOs is central to all SEED-supported activities, accordingly, all citizen and NGO activities will be refocused to emphasize their contributions to the private sector, the finance sector, and local government development. Social Sector Restructuring/Quality of Life: The Government of Poland has proposed a controversial public pension reform legislation package and a health insurance plan. Both proposals are controversial and have generated considerable criticism and debate. The long-expected reform in the Polish Social Security Administration leading to the development of a "single identifier system" for tracking individual contributions has recently been initiated under an EU program. The Social (Welfare) assistance system is working relatively well, having been decentralized in 1990. New environmental regulations strongly promote pollution prevention through the introduction of economic incentives and waste minimization. Social Benefits and Services: Beginning in 1995, USAID's activities in this area focused on health service delivery at the local government level. Activities will focus on local government capacity to contract for goods and services. They will also focus on strengthening the capacity of individual health facilities to organize and manage service delivery in a more autonomous and client-oriented fashion. Natural Resources: Since 1990, Poland has channeled significant resources into water pollution abatement and the mobilization of water resources resulting in a 22% decrease in municipal wastewater discharge into surface water between 1990 and 1993. A new water management law is in preparation. In 1995, waste minimization practices in 52 companies resulted in a decrease in disposal of 45,000 tons of sulfuric acid, 1,530,000 tons of wastewater, and 1,010 tons of ammonia. The participating companies realized savings of over $7.0 million and generated $1.5 million in investments. Two municipal wastewater treatment plants became operational in 1995 and two USAID-assisted municipalities received Presidential awards as the best ecological municpalities in Poland. Next Steps: The existence of significant Government decisions on social sector reform have halted plans to support central government initiatives in the sector. USAID will instead promote social sector reform and improved quality of life through directly strengthening the capacity of local governments to deliver and manage efficiently health and welfare assistance and improving local waste minimization and waste management activities.

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