Sell-offs energise economic engine

PUBLISHED : Wednesday, 03 May, 2000, 12:00am
UPDATED : Wednesday, 03 May, 2000, 12:00am

As former eastern bloc countries attempt to shake off the fiscal hangovers of their once centrally planned economies after almost a decade of economic liberalisation, the results have been anything but encouraging. Civil war, ethnic conflicts and corruption have dogged these fledgling democracies, choking off the benefits that were supposed to come with free markets.

Poland stands out as an exception. The ethically-stable country ranks as the number one emerging market of former communist countries, posting GDP growth rates and foreign investment flows that rival the economies of Southeast Asia.

How has Poland managed to avoid the perils that have rocked so many of its neighbours? Largely through good governance and a culture of creativity, argues Romuald Morawski, the commercial affairs consul in Hong Kong.

Mr Morawski said economic restructuring would place it in the league of advanced nations with full membership in the European Union by the target date of 2002. As part of its economic develop ment strategy, he said Poland was seeking closer ties with Hong Kong and mainland China, through a partnership that shared both business and cultural affairs.

'Our people have a reputation for being dynamic and creative,' Mr Morawski said. 'These characteristics we share with the people of Hong Kong. You will find it particularly in the areas of shipbuilding, banking, construction, mining and telecommunications where we have proved to have cutting-edge capabilities. The Polish government's laissez-faire policy has helped to rekindle and foster these achievements.' Another reason for Poland's rapid resurgence: the country geographically bridges Eastern and Western Europe and is slowly developing as a gateway to a market of more than 200 million.

Mr Morawski said Poland's largest trading partners were Western European nations, but increasingly investors were looking for a point of entry into the emerging eastern markets of Lithuania, Belarus, the Ukraine, Slovakia and the Czech Republic. 'Easy access to these markets and foreseeing entry into the European Union make the Polish market very attractive for Hong Kong companies,' he said.

Like most economic recovery stories, Poland had a little help along the way. Foreign investors - attracted by the country's stable government and commitment to economic reforms - pumped more than US$8.3 billion into the country last year. Since the political reforms in 1990, combined foreign investment inflows have reached $38.9 billion.

This year, investments are forecast to reach $12 billion. Economic growth is forecast to increase to 5.1 per cent for this year from 4.7 per cent last year, prompting a United Nations report to describe Poland as the 'most dynamically' developing country in eastern Europe.

Germany ranks as the largest foreign investor, with a cumulative US$6.1 billion, followed by the United States with $5.2 billion and France with $3.3 billion. Asian investors account for 5.8 per cent of the total foreign investment, contributing $2.1 billion. South Korea is the single largest contributor. Ambitious privatisation plans have also helped put the sparkle back in the Polish economy. The sell-off of state assets including banks and telecommunication companies has continued and the government is halfway towards achieving its privatisation goals, according to Mr Morawski.

'Privatisation is one of the most important engines of Polish restructuring,' he said, noting that Polish exports have doubled since 1994. 'Productivity in the private sector is much higher and it is leading the way to development, generating profit and investment, thus guaranteeing the continuous and fast growth of the Polish economy.' However, Mr Morawski said there was, indeed, a downside to restructuring. Unemployment remains high and the benefits of prosperity are not always distributed evenly across the population. But the government was committed to economic reforms, he said.

'Transformation of the economy is underway.'