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Poland: World Bank Outlines Strategy For Joining EU

Washington, 7 August 1997 (RFE/RL) -- Polish citizens and businesses must substantially increase their savings and the government must dramatically cut public spending for Poland to be ready to join the European Union (EU), according to the World Bank.

In a special report prepared for Polish authorities, the bank urges Warsaw to adopt an economic strategy of "fast sustainable growth." It outlines a raft of reforms and changes that will be necessary for Poland to adjust its policies and laws to norms set out in EU treaties, directives and regulations, and to develop the human and institutional capacity to implement and enforce them.

The bank's Country Director for Poland, Basil Kavalsky, says Poland's ability to meet the accession criteria will largely depend on its economic performance. "Growth is a clear sign of a well-functioning market economy," he says, and "firm economic reforms which generate and sustain further growth will be the key for Poland to fulfill the requirements of EU membership."

Senior World Bank Economist Daniel Oks says, however, that "accession to the EU goes significantly beyond the implementation of specific economic instruments or acts of European law."

It is, he says, an issue of "creating the conditions for Poland to enjoy the benefits of integrating in the European and the global economy. The reforms...should be viewed as critical instruments in increasing the well-being of people in Poland."

The report says that at the core of its proposals is the need to increase private savings and reduce public spending. Increasing the country's overall savings rate by about five percentage points of GDP (gross domestic product, the size of the economy) per year over the next seven years is a "pre-condition" for the growth strategy, says the report. Structural strengthening of public finances -- particularly through social security reform, closure of unprofitable mines and faster privatization -- is the main way to help improve public saving and provide incentives for private saving.

By reforming its pension system, privatizing and restructuring state-owned enterprises and banks, and introducing regulatory reforms to increase private sector participation in infrastructure development, Poland should be able to cut current public expenditures by more than six percentage points of the GDP while raising public savings by 4.7 percent of the GDP.

The domestic savings play a critical part in drawing more foreign investment into the country, says the bank, and Poland must improve its investment climate by eliminating the "bureaucratic micro-management" that dominate some imports, reduce all tariffs to the level of EU common duties, eliminate barriers to foreign direct investment, and ban non-tariff import barriers.

State-owned enterprises still account for 36.5 percent of Poland's GDP, says the bank, and in order to foster investments and growth, privatization must be accelerated, especially in such large industries as coal, steel and chemicals. In the case of coal, says the bank, privatization will need to be accompanied by restructuring.

Coupled with that, says the bank, labor in Poland will need to move from declining sectors, such as agriculture, coal mining and heavy industry, to areas of higher productivity and growth potential. To do that, the bank urged Warsaw to focus on retraining and providing incentives to search for new jobs, and reforms in housing and transport, to increase labor mobility.

The Chief Economist of the Bank's Europe and Central Asia department, Marcelo Selowsky, says "the challenges of accession... offer unique incentives for Poland to further strengthen its economy, and address the most urgent needs in the areas of social protection and environment."