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Economic Background of Poland

After the Second World War, the Polish government adopted a centrally planned system of economic planning (International Labour Organization). The adoption was undertaken with the least consideration of the differences in the levels of economic development between the two countries. Similarly, there was the least regard for the resources endowment among the countries (Trudel, R. , p 935). Ideally, consideration for the social, political and cultural levels of the countries ought to have been given due considerations. The thieving of the Polish economy was largely catapulted by the rich natural resources endowment.

Poland was the largest producer of food in the eastern part of Europe. The industrial sector of Poland was based on the richness in the endowment of coal. Food production industries and equipment manufacturing firms were founded on the availability of coals for energy production. Then, in the 1990’s, Poland was the 4th largest producer of coal (Khan, S. R. , p 1092). After the Second World War the Polish leadership established socialist model of economic development. The result of the reorganisation was the establishment of large enterprises, heavy industry and a heavily centralised bureaucracy.

The centralised bureaucracy controlled the production process, ignoring the capitalist practises of employee job satisfaction and the demands of the consumers. Poland had abundance of agricultural resources that remained mainly in the hands of the private sector. At the same time of communist dominance, the states influence on the sector was mainly through taxation. The state also controlled the use of the materials. Besides, the state tried to limit the amount of the private plot any individual would own.

Nevertheless, most of the industries and craft firms remained in the ownership of private ownership with minimal state control. Poland’s economy was equally delineated from the rest of the world mainly because of the nationalised foreign trade. However, (Ministry of Finance, Republic of Poland Basic Information) there were numerous reforms undertaken in the 1970’s and the ‘80’s that saw individual trade activities, including foreign trade activities. The trade with the international community was further curtailed by the obligations that were laid down by the Council for Mutual and Economic Assistance.

Further, given that the association was largely controlled by the Soviet Union, as a break away states the Polish economy remained disadvantaged (New African p 14). The Polish economy nonetheless gained to some extend some advantage in its balance of payment. On the other hand, Poland experienced increased inefficiencies in its production process, besides the low quality of production that did hamper increased international trade with other countries. The years between 1970 and 1980 saw the upsurge of social unrest (Heritage Foundation 2005, p 36).

This was resultant from the failure by the state to inspire incidental economic growth from its lopsided economic plans. The installation of the non-communist government in the 1989 saw a paradigm shift in the economic trend of Poland. Inherently, the government was mainly inspired by the popular support it was enjoying. Consequently, the populist government introduced the western economy system of the market economy. The government policy was dominated by the privatisation of most of the state corporations. Within the fist two years of its installation the government had put the economic prospects of Poland on the right track.

While the prospects appeared quite uncertain in 1992, economic indicators were rife that the economy would pick up after all. Consumer goods were made readily available (Payne, A. , p 311). The positive economic indicators were backtracked by the inefficiencies in the state enterprises. This inefficiency led to the decreased productivity increase in unemployment and transitory stagflation. This was relatively treacherous as the inflation had earlier been reduced to almost zero. The Polish government had to get means of gaining international support particularly from financial institutions.

While the Polish economy would have been boosted by the writing of its hard-currency debt, the communist management system remained a partial hindrance to the economy prospects of the Polish economy. The communist policies largely affected the prospective foreign investment that would have been incidental in the country’s prospects. In 1992 what had been planned as a period of economic adjustment turned out to become a longer nightmare with very mixed returns (Bird, G. , Rowland, D. , p 879). Poland made much effort in trying to make its economy western (Microfinance Network).

This forced the Polish to largely depend n international financial support and expertise. However, the adoption of the western policies that were capitalist in orientation assisted the polish economy towards gaining economic stability. The economic growth and development of Poland has remained on course over the years, succumbing to the least international economic pressure. The economic freedom of Poland as at the beginning of 2010 was put at 63. 2, being ranked the 71st in the ranking for free economies. These score represents an increase of 2. 9 points from that of 2009 (Ministry of Finance, Republic of Poland Basic Information).

According to the ranking Poland is the 33rd of the 43 Europe countries. This ranking represents an above average global ranking. Notably, the Polish government has had a continued enhancement of an entrepreneurial environment. This has made the Polish economy gain an estimated 15 score in the 2010 index. The economy has over the last 5 years recorded a sustainable growth of 5%. The monetary policy of the Polish government has remained very stable. Besides, the finance sector has been able to withstand the tide in the international crisis relatively well (International Labour Organization).

The rates of tax have become quite competitive coupled with sound implementation corporate taxes policies that are relatively flat. Individual taxes have equally been reduced. The Polish government has also reduced the levels of corruption and strengthened its legal framework. This has improved the domestic environment that has been incidental in the encouragement of foreign investment (Grzegorz W. K. , p 48). The high expenditure by the government has been able to hold down the economic freedom of Poland above board. In addition the Polish economy has been able to maintain a sound pension scheme for its workers.

This scheme has remained a central target for further reforms. Relatively high government spending holds down overall economic freedom in Poland. The government of Poland has also made relentless efforts towards limiting its expenditure and check the ever-rising fiscal deficit. Consequently, the Polish government has seen the property right as another central target for meaningful reforms. While the judicial system has been fairly reliable, it is inefficient and needs partial overhaul. The business freedom in the economy of Poland has been limited under the regulatory policies developed by Polish government.

The application for business operation permits have been reduced to 32 days. This is relatively commendable relative to the world’s average which is estimated at 35 days. Poland shares similar trade policies as those embraced by the European Union. The country has an average tariff rate of 1. 3% as at end of the year 2008 (Chaudhry, P K. , Kelkar, V L. , Yadav, V. , p 60). The hindrance has been that the EU member states have had very high tariffs on agricultural and manufactured products. Besides the MFN code for most of the EU states has been relatively complex.

These restrictions notwithstanding, there have been manufacturing and agricultural subsidies and quotas. Overall, this has limited the economic operations of the Polish government. The European Union has a lot of restriction on biotechnology and pharmaceutical products. Intellectual property rights have also been key challenges in the EU and subsequently to the Polish government. Subsequent, the ranking had to deduct ten points to carter for these restrictions. This was meant to account for the non-tariff barriers. The polish government has had a relatively high income rate of about 40%.

Commendably, the rate has been reduced to 32% (Chaudhry, P K. , Kelkar, V L. , Yadav, V. , p 71). This has been a relief on the part of corporate prospective. The Polish economy has a rate of 19% of corporate tax rate which is comparatively low with the European League. Other notable taxes are inclusive of inheritance tax, transfer tax and value added taxes. The few past years have had an average of 33. 5% of Gross Domestic Product as the overall tax revenue (Payne, A. , p 318). The privatisation that had been a common feature of the inception of the capitalist policies has been stalled.

Besides, the expenditure of the government, inclusive of the consumption and the transfer payments has been relatively high. This high government expenditure, estimated at 42. 1% has been able to stimulate the economy growth (Bird, G. , Rowland, D. , p 238). In the period between 2006 and 2008, the Polish economy has had an average inflation of 3. 5% (Griesgraber, J M. , p 354). Being a member of the European Union, this has led to the distortion of the prices of goods from the agricultural sector. The government has been monitoring the prices of pharmaceutical products and medical products.

The government has deemed this a necessary and almost sufficient condition for the effective functioning of the economy (Ryder, P M. , p 419). In view of the foregoing, the Polish ranking had to have reduction in its monetary freedom scores by ten points to carter for the adjustment in the distortion in the measure of the domestic prices. The Polish government has treated domestic and foreign capital investment as of equal significance in its prospects. The government has refrained from screening investment and does allow for 100% private foreign ownership of businesses and firms (Dreher, A.

, p 238). Nevertheless, all the investments and business need a valid permit and concession from the government. Businesses engagements may be deterred by regulatory unpredictability and administrative red tapes. The Polish court systems are equally low in their pursuit for legal redress; this hampers the prospects of business engagements. Both the non-residents and residents can open foreign exchange accounts with minimal government restrictions. The effecting of payments and transfers and transactions has to be conducted through a domestic bank (Trudel, R. , p 928).

However, transaction of capital orient particularly with the European Union member states are subjected to a number of restrictions and has to get government approval. The ownership of land by foreigner is subjected to a number of controls and restrictions. The financial system of Poland has been growing over the years. The availability of credit has been made a success at the market terms. Foreigners are also able to access domestic financials markets. This has been affected to make possible foreign investments. The banking sector in Poland has experienced tremendous competition.

The banking sector controls most of the assets (particularly commercial banks), estimated at about 90% of the assets (Payne, A. , p 321). Foreign owned banks account for approximately two-thirds of the banking sector in Poland. The Polish government retains majority control in particularly two banks with relatively low-interest rate loans for the Polish homeowners and farmers. The process of privatising government owned firms has been relatively low, particularly in the insurance industry. Apparently, the Polish capita market has become relatively intricate, with the Warsaw Stock Exchange experiencing tremendous expansion (Bird, G.

, Rowland, D. , p 849). With this stability and as has been already mentioned, the economic turmoil has had the least effect on the polish economy, or at most the effects has been quite mild. The rights for the ownership of property have been well protected. The legal framework provides for the acquiring and disposal of property at will with minimal restrictions. Piracy of the intellectual property is still perpetuated in the Polish despite government efforts in improving their protection. Corruption is a significant indicator in any economy.

The regulations relating to labour in Poland are fairly rigid, the cost, non-salary, of employing workers is high, and the dismissal is very stringent making the employment prospects lower Poland is ranks 58th of the 179 (Griesgraber, J M. , p 286) countries ranked in the Transparency International’s Corruption Perceptions Index of 2008. In evading the fears related to this menace, the government has established an office to combat the scourge. The rate of corruption has reportedly declined as a consequent, particularly in public service and goods procurement.

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