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How to create an increasing value in the Polish industry?

In the near future, in order for the Polish economy to succeed, companies will need to engage in closer cooperation with both one another and with various segments of the state. The Polish economic policy should therefore adopt a formula under which companies set ambitious goals for the state, while the state sets ambitious goals for entrepreneurs.

During the last 25 years, many Polish companies have learned how to compete efficiently on both the Polish and the international market. The areas in which Polish companies proved to be particularly successful were such branches of industry as food processing, manufacture of furniture and windows, manufacture of various means of transport as well as manufacture of mining machinery. All of these sectors require a relatively high input of complex human effort as well as a technical staff of adequate quality. Furthermore, the number of companies established by Polish entrepreneurs which have grown to become major players in their respective sectors on a European scale is slowly increasing. Companies such as PESA, Solaris, Stocznia Remontowa, Wielton, Synthos, Famur, Kopex, Maspex or Selena are now competing exclusively against international companies.

In order to successfully compete with other companies on a European or even global scale, these companies have learned how to structure their processes, develop new products as well as build effective teams and management structures. They have also developed competitive manufacturing technologies and business models and have taken on the role of integrators of value chains which include both domestic and international subcontractors. A particularly advantageous situation occur when such companies have, in the process of building their chain of subcontractors, have managed to create around themselves a network of smaller and larger subcontractors of components, semi-manufactured products and services.

Entrepreneurship as national wealth

Polish companies which build a competitive position both in Europe and globally should be looked upon as a source of national wealth. It is in this manner of reasoning which governments of all G20 member states apply, treating such companies as assets of strategic importance. Most of these assets, when viewed on a national scale, remain limited, and therefore the governments of countries such as the United States, Germany, France, Switzerland or Japan approach the issue of sale of domestic companies to foreign investors cautiously and intervene in the course of such processes on many occasions regardless whether the companies in question are private or state-owned. Gradually, an increasing number of practitioners, experts, high-level officials and policymakers are beginning to understand that at the present stage of development of our economy, mechanisms of this kind are also necessary in Poland.

However, one should not forget that the contemporary Polish economy, including, in particular, its industry, is to a very large extent developing interdependently with the global environment. Approximately 50% of the value of manufacturing output of industrial companies in Poland is generated by companies controlled by foreign capital – a level which remains among the highest anywhere in the world. Such a significant role of foreign companies may be considered as both a form of burden and a tremendous advantage. On one hand, there is a certain risk of substantial transfer of capital to other countries, especially during periods of crisis. On the other hand, however, direct investments result in a very high probability of knowledge transfer to Poland as well as in opportunities for development for domestic companies.

Despite numerous critical views expressed on the issue, in the light of hard data it would be difficult to challenge the fact that this type of interdependence remains beneficial for our country at the present stage. This is especially apparent from the perspective of foreign trade. Polish export advantages are founded upon investments made in Poland by international corporations. Not only do they account for as much as 70% of all our exports, but also result in the Polish economy being incorporated into global value chains. Furthermore, the goods exported by foreign companies are more complex in nature and present a significantly greater added value than the goods exported by domestic companies.

The time of lonely struggle is over

The transfer of a part of this capital abroad is a risk which we need to factor into our geopolitical as well as geoeconomic position. Much as we are aware that significant influxes of funds from the EU budget are bound to end one day, we must also be aware that some foreign investments may disappear due to rising labour costs. It follows that one needs to look upon their current presence as a form of opportunity which we need to fully exploit in order to further our own objectives. We need to understand where it is that we want the Polish industry to go – this is a task which must be performed, first and foremost, by the Polish policymakers.

The primary objective of the Polish industrial development policy should be to maximise its controllability and to develop the broadest possible array of instruments which will make it possible for us to further our own interests. Today, this means that we need to take control of the most valuable links of the existing value chains and to secure the access to the rarest and most valuable resources as well as to attain the status of a player with a right of veto in complex, multilateral economic systems.

In order to achieve this objective, we need to do much more than to ensure that our state functions in a correct or even efficient manner. Furthermore, the fact that we have companies which are able to act with confidence and efficiency is no longer enough. The time of lonely struggle is now over. In the coming years, the necessary precondition for achieving further success shall be the increasingly close cooperation between companies themselves as well as between companies and various segments of the state. We therefore submit that the Polish economic policy should quickly adopt a formula under which companies set ambitious goals for the state, while the state sets ambitious goals for entrepreneurs. Both parties need to make very substantial efforts indeed in order to be ready to adopt this formula.

The article was written by Mr Jan Filip Staniłko, director of the Industrialisation 3.0 programme at the Warsaw Institute for Economic Studies and by Mr Krzysztof Domarecki, chairman of the Supervisory Board of Selena FM S.A.

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