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Private Sector
Assistance to the development of the private business sector in Poland
was one of the key element of the SEED-funded USAID assistance program
to Poland from its very beginning. A brief historical decription
of the assistance prepared by the USAID / Poland staff is provided below.
For more detail, look up descriptions of key activities,
which in some cases include links to key reports or other internet sites.
We also suggest you refer to the website of the Foundation
for the Promotion and Development of Small and Medium-sized Enterprises
(from January 2001 to be turned into the Polish Agency for Entrpreneurship
Development) to find out more about the small business sector in Poland.
USAID assistance to develop Poland's private sector
When the Mazowiecki government took office in September 1989,
it inherited a disastrous economic situation. Inflation was reaching
triple digits, the budget deficit was about 8% of GDP, and debt service
was five times export earnings. Subsidy of the economy, and particularly
of state enterprises, which made up 70% of the industrial sector and
controlled virtually all exports, was so high and disproportionate to
budget revenue that the budget deficit reached 29% of expenditures in
the first half of 1989. Per capita income had declined by about 20%
over the previous 10 years. The economy was essentially bankrupt.
The first actions taken by the new government were to regain
control over the budget and introduce bankruptcy procedures to let the
worst state enterprises fail. This was accompanied by a package of fiscal
and monetary restraints, and liberalization of trade. Market mechanisms
were expected to select the most efficient enterprises. It was recognized
that this process would result in unemployment, but that it was expected
to generate a drive toward efficiency through competition.
A major focus of U.S. Government assistance to Central Europe
in general, and Poland particular, was placed on the growth of the private
sector in the economy. This involved both assistance to the privatization
of state enterprises, as well as various activities aimed to enhance
the regulatory and institutional environment in which business operates.
As regards privatization of state enterprises, the assistance took various
forms:
- direct strategic investment in a dozen state enterprises
and investment in 15 companies listed on the Warsaw Stock Exchange
by the Polish-American Enterprise Fund;
- technical assistance to the Ministry of Privatization both
to prepare the privatization of specific companies (such as the state
airline LOT), or entire sectors of the economy (such as the glass
and furniture sectors);
- training for the Ministry of Privatization in order to allow
it to manage some of the complex privatization processes in a more
efficient manner, including the divestment of ancillary assets, implementation
of the Mass Privatization Program, and a fast-track sales technique
for smaller enterprises;
- training under the Regional Privatization Initiative to management,
workers, and union leaders in basic business skills, to ensure their
understanding of the processes taking place in their enterprises,
and to allow them to take a meaningful part in a transformation process
in which they played a key role; and
- assistance to voivodes (provincial governors) in locating
potential investors and preparing their enterprises in more remote
and economically less vibrant parts of Poland for privatization.
Entrepreneurship
The process of privatizing the economy, however, is not simply
taking public companies into the private sector. It also includes the
growth of new businesses, whether as a result of foreign investment
(though initially modest, it is now estimated to have come to over $30
billion since 1989) and of new businesses being established by Polish
entrepreneurs. There are now over 2 million such businesses operating
in Poland, an impressive number considering where Poland was at the
start of the transition process. To facilitate these developments, USAID
assistance included:
- providing experts to firms and agribusiness through volunteers
that brought their business experience and insight to individual entrepreneurs
in Poland;
- designing and implementing networks of business information
centers, to allow business to have local access to a computerized
network of information on business, trade, and training opportunities,
as well as legal and regulatory information;
- supporting a number of embryonic business associations to
allow Polish entrepreneurs to improve their lobbying power and access
to business information and contacts. The very independent entrepreneurial
culture of Poles has made it very difficult to sustain such organizations,
and many of them have failed;
- training consultants and business support organizations to
provide quality services to entrepreneurs, something the latter desperately
require as approaching EU membership puts Poland’s small businesses
at risk from increased competition. (A more specialized activity to
support manufacturing extension centers, with the help of industry
experts is trying to improve the services available to help innovative
business ideas become viable.)
A concerted effort was also undertaken by USAID to improve both
an understanding among government and parliament of the needs of small
business and of the legal framework that regulates it. That assistance
has included:
- drafting of anti-trust and investment legislation at the
beginning of the assistance process, when the principles governing
the new economic system were being set down;
- drafting amendments to public procurement legislation that
made access to public procurement by small companies easier;
- molding government policies to support the small business
sector, with funding to promote competitiveness, innovation, and exports
gradually becoming available from the State ;
- drafting and guiding a new law laying the framework for economic
activity in Poland through the legislative process in 1999; and
- providing a public forum for discussion on lobbying, training
over 400 Polish associations in how to lobby, and working to provide
for a more open and transparent legislative process.
The risk-taking and entrepreneurship of a considerable section
of Poland’s population have allowed the country to achieve strong
economic growth for the eighth year in a row after over a decade of
economic stagnation and decline. Although Polish business continues
to face two impediments to its continued growth – excessive bureaucratic
and fiscal constraints from government, and a lack of knowledge among
entrepreneurs regarding the competitive shock they are likely to face
with EU membership – it will continue to be the engine that will
allow Poland to make up for decades of economic mismanagement, and to
attempt to absorb some of the increasing numbers of unemployed and school
leavers.
Agribusiness
Until 1990, the agricultural sector in Poland was closed and
inward-looking. Agricultural policy was based on notions of income parity
with the urban population and on food self-sufficiency. To achieve those
objectives, prices were manipulated, subsidies were provided, production
targets were established, and imports and exports were controlled with
little consideration given to economic costs. Nevertheless, farmers
and part-time farmers had fared relatively better in the ten years preceding
transition, when compared to the rest of the population, as their real
incomes had declined by only 3% and 1% respectively.
Private farmers and state collective farms were both dependent
on state agencies and state-controlled cooperative sectors for purchases
and sales. In the state and cooperative sectors, capital was immobilized,
since investment was always a government decision and bankruptcy of
public firms was not allowed. Since prices were not allowed to reflect
scarcity, central allocation had to be used, resulting in large distortions
and waste. Similarly, labor was immobilized because housing and other
social benefits were linked to employment, itself considered a basic
right.
Unlike many countries of Western Europe, the Polish rural sector
is of major importance to the social and economic equilibrium of the
country. The rural population had remained stable (approximately 15
million) between 1950 and 1990, about 40% of the population. The Polish
rural sector represented a unique combination of the private economy,
dominant at the farm level (75% of the area, employing 85% of the active
agricultural population), and cooperatives and state enterprises, dominant
in activities other than agriculture (92% of the active nonagricultural
population). This combination of decentralized and centralized economies
was a result of the failure to introduce agricultural collectivization
in Poland and of the subsequent policy of indirect collectivization.
USAID assistance to the agricultural sector concentrated on
the provision of economic and technical information to farmers and agribusinesses
(farm viability), upgrading the capacity of extension services, rehabilitating
the rural credit delivery structure, upgrading dairy cooperatives and
dairy producers, and privatization of state-owned agribusinesses. Around
1995, the program ceased to provide assistance at the farm level, and
worked with agricultural institutions (associations or foundations).
USAID also became involved in an attempt to design and implement legislation
for the system of licensed warehouses and warehouse receipts to help
regulate the commodities market. One of the USAID / Poland staff members
summarized the asistance in a separate report.
Management Education
Although Poland enjoys impressive levels of education and maintains
literacy levels similar to those of developed countries, Communist ideology
prevented some topics critical to the running of businesses – such
as modern management and marketing theories – from being widely
taught before 1989.
Conscious of a need to train both existing factory managers,
over two million embryonic entrepreneurs, and successive new generations
of students, training and education programs in business management
were greatly needed. The support provided to management education in
Poland was aimed not only at making management education more accessible
to the population at large, but at ensuring modern courses and degrees
of high quality.
Some of the assistance provided was limited to one topic, such
as the training provided by the American University at the Academy for
Entrepreneurship and Management in Warsaw on improving skills to build
trade links between Poland and the U.S. Others took on a wider scope
of training in various select management topics – Central Connecticut
State University working with the Universities in Wroclaw and Gdansk,
the University of Illinois helping the development of an MBA program
at Warsaw University, or the creation of business training centers by
the University of Ohio in Rzeszow and Bialystok.
The Polish-American Enterprise Fund made a considerable contribution
to the development of management and business education in Poland by
publishing 82 books on various aspects of economics, and providing over
15,000 scholarships to young Poles attending the country’s leading
public and private business, management, and banking schools.
USAID supported the development of close partnerships between
several higher education institutions: the University of Maryland and
University of Lodz, and the University of Minnesota’s cooperation
with both the Warsaw School of Economics and the agricultural college
in Olsztyn. As a result, Lodz is offering a full MBA program using top-of-the-line
distance learning technology to bridge the Atlantic while enabling U.S.
professors to teach classes in Poland without the need to travel; and
the University of Minnesota is providing a full MBA at the Warsaw School
of Economics. The assistance and training provided to students and faculty
made a significant contribution to the advancement of the Olsztyn agricultural
college to full university status in 1999. In all these cases, courses
provided high quality management education to thousands of fee-paying
Polish students, which will continue beyond USAID assistance as result
of academic partnerships that have been developed.
In addition to the thousands of students that have access to these
modern management training facilities in Poland, 436 have benefited
from the scholarships provided under the Georgetown University program
and other participant training opportunities. These training opportunities
in the U.S. – whether for a week or a year, spurred individuals
into action and allowed them to have a clearer vision of what they wanted
to change in their own country.
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