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USAID Mission to Poland
Europe & Eurasia
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Agribusiness
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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Last Updated on: March 13, 2002 |
