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

2. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Starting point -1989 political freedom but also a collapse of „old” economic system Inflation – 389% Inflation – 389% GDP decline – 10,5% GDP decline – 10,5% Real wage decline – 24% Real wage decline – 24% urgency for comprehensive transformation of the system

3. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Transformation of economy - main principles Establishing a legal framework Establishing a legal framework Stability Stability Liberalisation Liberalisation Structural reforms Structural reformsBut… Nothing about social dimention of the process

4. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Recovery of the economy

5. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Privatisation main tool for building market economy main tool for building market economy the best „panacea” for competitive challenges the best „panacea” for competitive challenges employment in private sector only 9% (1990), mainly in SME’s employment in private sector only 9% (1990), mainly in SME’s First time foreign employers present First time foreign employers present no solution for „difficult sectors” no solution for „difficult sectors”

6. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Employment in private sector (%)

7. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Share of private sector in GDP (%)

8. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Industrial policy (1) Bad experiences with central-planned economy Bad experiences with central-planned economy Neoliberal approach (1990-93) – the best industrial policy is the lack of industrial policy Neoliberal approach (1990-93) – the best industrial policy is the lack of industrial policy Rising social costs of transformation – necessity to take into account trade unions’ demands Rising social costs of transformation – necessity to take into account trade unions’ demands 1994 – first social agreement at national level on privatisation issues 1994 – first social agreement at national level on privatisation issues

9. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Industrial policy (2) 1994 – Poland associated with EC 1994 – Poland associated with EC 1997 – opening of the accession negotiations 1997 – opening of the accession negotiations On this occasion Polish industrial policy is formulated On this occasion Polish industrial policy is formulated Horizontal policy vs structural dimention Horizontal policy vs structural dimention Sectoral policy as an instrument for restructuring Sectoral policy as an instrument for restructuring

10. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Restructuring of „difficult” sectors Based on agreements between trade unions, government and employers Based on agreements between trade unions, government and employers Voluntary reduction of employment Voluntary reduction of employment Different tools for social protection and activation on the labour market were used Different tools for social protection and activation on the labour market were used Preventing exclusion from labour market as a main goal Preventing exclusion from labour market as a main goal

11. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Restructuring of employment – steel industry

12. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Restructuring of employment – mining industry

13. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Restructuring of mining -comparison British mining industry British mining industry 16 years (1983-1999) - 235 000 workplaces reduced Polish mining industry Polish mining industry 13 years (1990-2003) - 260 000 workplaces reduced

14. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Restructuring of employment - railways (PKP)

15. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Foreign Direct Investments in Poland (accumulated, bln USD)

16. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Foreign companies in Polish economy 2001 – 11,5% GDP in private sector 2001 – 11,5% GDP in private sector Share of employment in private sector: Share of employment in private sector: 1995 – 2,8% 2001 – 5,7% Main sectors: metal, banking, chemical industry, food processing industry Main sectors: metal, banking, chemical industry, food processing industry

17. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Foreign investors – case of Philips: Global electronic competitor Global electronic competitor 167 000 empl. in 150 factories around the world 167 000 empl. in 150 factories around the world Poland - 6 700 employers in 6 factories Poland - 6 700 employers in 6 factories European Centre of Lighting and European Accounting Centre (in the process of development) European Centre of Lighting and European Accounting Centre (in the process of development) Average annual export volume = annual export volume of entire coal mining industry = 1 billion USD Average annual export volume = annual export volume of entire coal mining industry = 1 billion USD

18. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Multinationals and industrial policy Some sectors dominated by MNCs Some sectors dominated by MNCs Introducing new technologies and innovative approach are advantageous for sectoral competitivity, but… Introducing new technologies and innovative approach are advantageous for sectoral competitivity, but… Reluctance to participate in sectoral dialogue Reluctance to participate in sectoral dialogue Lobbing used in order to put pressure on the government Lobbing used in order to put pressure on the government Public interest often not compatible with the global strategy of MNCs Public interest often not compatible with the global strategy of MNCs

19. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Relocation – what does it mean in Poland? Moving production within Europe - opportunity for increasing competitiveness of the entire region (but social standards should be protected) Moving production within Europe - opportunity for increasing competitiveness of the entire region (but social standards should be protected) Main threat – delocalisation outside Europe (e.g. textile industry in Poland) Main threat – delocalisation outside Europe (e.g. textile industry in Poland) Positive attitude - moving investments from outside Europe (e.g. Goodyear, 3M) Positive attitude - moving investments from outside Europe (e.g. Goodyear, 3M)

20. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE German FDI (accumulated) in 2002 structure of outflowing (%) Source: Gdańsk Institute for Market Economics, Deutsche Bundesbank

21. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Geographical directions of German investments in 2005 (%) Source: Gdańsk Institute for Market Economics, survey of German Chamber of Trade and Industry (DIHK)

22. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Attraction of investments from outside Europe - case 3M (Minnesota, Mining& Manufacturing) American based „conglomerate” MNC American based „conglomerate” MNC 75 000 employees, 44 plants 75 000 employees, 44 plants Medical tapes division is to be moved to Poland from France… but also from Japan and USA Medical tapes division is to be moved to Poland from France… but also from Japan and USA As a result Europe will became worldwide leader in this brand As a result Europe will became worldwide leader in this brand

23. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE Conclusions Transformation in Poland: macro-economic stability achieved but privatisation too chaotic Transformation in Poland: macro-economic stability achieved but privatisation too chaotic Industrial policy not introduced in the beginning, enforced by trade unions and EU integration Industrial policy not introduced in the beginning, enforced by trade unions and EU integration Useful tool for sectoral restructuring Useful tool for sectoral restructuring But after privatisation a lot of sectors are controlled by MNC’s, no possibility to carry on effective industrial policy But after privatisation a lot of sectors are controlled by MNC’s, no possibility to carry on effective industrial policy There is a need for European sectoral approach There is a need for European sectoral approach

24. INDUSTRIAL POLICY AND RESTRUCTURING - POLISH CASE And final remark There is no effective industrial policy without involvement of trade unions