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Poland: Finance Minister Delighted With Pace Of Transition To Market Economy

Washington, 20 April 1998 (RFE/RL) -- The man who was the architect and driving force of Poland's radical shift to a market economy -- Deputy Prime Minister and Finance Minister Leszek Balcerowicz -- says his biggest surprise in the process has been the pace of growth and the dynamism of the private sector.

Balcerowicz was a university professor who came to prominence in 1989 to push Poland into what was the fastest shift from central planning to a market-based economy among all the countries in Central and Eastern Europe and Central Asia.

The road has not been easy and Balcerowicz was out of government for a period when the pain of the radical reform process made him a less than popular figure in Poland.

Now back in public life as both finance and deputy prime minister, Balcerowicz has lost none of his zeal for free markets, admitting that even he was not prepared for how dynamic the private sector proved to be in Poland and how well it has grown. "That was the most positive surprise of the whole thing," he told a few international financial journalists over breakfast at the Polish Embassy in Washington on the week-end. RFE/RL's economics correspondent was one of the five.

Balcerowicz was in Washington for the regular spring leadership meetings of the International Monetary Fund (IMF) and the World Bank as well as to take an active role in a conference of 22 nations to redesign and strengthen the architecture of the international financial system.

Called by U.S. Treasury Secretary Robert Rubin, the conference of finance ministers and central bank governors of the 22 countries -- including Poland and Russia -- set up three working groups to tackle specific proposals on improving the transparency and accountability of national financial systems and strengthening the ability of global institutions like the IMF to deal with crises like the most recent one in Asia.

Balcerowicz has clear ideas about what is wrong and how the global system can reduce the risk of future crises.

First, there must be full information about what is actually going on in national economies and people must be willing to look at the information, he said.

One question coming out of the Asian crisis, he says, in whether bankers, lenders and investors ignored much of the information they did have, preferring to look the other way while grabbing bigger profits.

Secondly, once assuring that as much information is available as possible, there must be incentives to act on what is known -- and that, says Balcerowicz, means "punishment for bad decisions."

If major international banks keep pouring short-term loans into potentially dangerous situations as they did in Asia, he says, they ought to suffer the subsequent losses. All parties -- the borrowers and lenders alike -- must "share in the consequences, both good and bad," he says.

Balcerowicz says that while he strongly supports liberal and open global trade in goods -- that is "beneficial to all sides" -- he is willing to consider measures to have some controls available on the flow of short-term capital. Short-term capital refers to loans or investments for under one year, often for as little as three months. Balcerowicz says the "size and speed" of the movement of this kid of money has become unbelievable in the growing global market place, a new problem for which he says he is open to "new ideas."

Reforms for the global system will find Poland in the midst of its own continuing reform, says Balcerowicz. Warsaw is preparing to speed up large scale privatization, especially focusing on transportation, railroads, coal mining, insurance and finishing up banking. That effort will be spurred, he noted, by the release last Friday of the 415 million dollars from the multinational Polish Bank Privatization fund.

But Poland needs to continue to expand all of its reforms as it moves towards membership in the European Union (EU). "We must bring inflation down much further -- it's currently around 11 percent annually -- and we must reduce the budget and push ahead on privatization," he says. Experience has shown everywhere, but especially in Poland, that "private owners are stronger" than public owners and work harder to produce economic growth.

Balcerowicz said he sees the former socialist countries moving toward a new, peaceful relationship that is making them all better and actually bringing them much closer together.

In the old Warsaw-pact days, he says, the leaders of these nations "hugged and kissed" but there was virtually no relationship between the peoples. Now, he says, there is no kissing among the leaders, but people by the millions are crossing borders back and forth, trading, getting to know each other and building ties that were never there in the socialist days.

Poland's border with Belarus, which Balcerowicz noted will be the eastern border of the EU one day, is of some concern to Warsaw and he says Poland is considering ways to open it up more.

New Polish consular offices are to be opened in Belarus to make visas far more readily available and Warsaw wants to work with Minsk on easing current restrictions. "We don't want to turn our backs on anyone," he says.

Balcerowicz sees an independent, market oriented Ukraine as "absolutely strategic" to the success of the new relationship among these countries, but is "concerned" over Kyiv's extremely slow pace of reforms and faltering economy.

As to Poland's membership in NATO, Balcerowicz says everyone in the region knows it is not an "aggressive" alliance which threatens anyone and that once Poland is in, the issue will be forgotten. "Russian officials tell me privately they don't really care about Poland joining NATO, but can't say that publicly for fear of being attacked" by the nationalists. And polls of average Russian citizens show it is not of any concern to most people, he says.

The cost of joining NATO is not prohibitive for Poland, adds Balcerowicz. "We needed to modernize and revamp our military anyway," he says, and in the beginning NATO only demands comparability of systems, not massive upgrades.