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Poland

Remarks on "Policy Priorities for Making Poland a More Inclusive and Knowledge-based Economy"

 

Remarks by Angel Gurría,

Secretary-General, OECD

Warsaw, Poland, 25 November 2016

 

Deputy Prime Minister, Ministers, Ambassadors, Ladies and Gentlemen,

 

I am delighted to be in Warsaw to celebrate with you this 20-year milestone in the friendship and working partnership between the OECD and Poland.

 

I’d like to thank the Ministry of Foreign Affairs for hosting us and for providing such a receptive environment for the proposals contained in our analysis called “Policy Priorities for Making Poland a More Inclusive and Knowledge-based Economy”.

 

Poland has experienced 20 years of impressive economic prosperity

 

The past 20 years have been a success story for Poland: the country has grown faster than any other European economy.

 

Poland has made impressive progress in raising living standards. Between 1990 and 2015, the GDP per capita gap with the OECD average was closed by more than 25 percentage points, from 38% in 1990 to 65% in 2015. Remarkable!

 

Poland’s economic progress has been accompanied by significant social accomplishments. For example, life expectancy increased from 71 years in 1990 to 77 years in 2014. Over the same period, the share of the labour force with tertiary education more than doubled, from 13% in 1992 to 31% in 2015. Poland also became more inclusive: between  2007 in 2013, the Gini  coefficient, a standard measure of inequality, declined by 1.6 points.

 

This success story has also been reflected in Poland’s results in the Programme for International Student Assessment (PISA). While the performance of Polish 15-year-olds was below the OECD average in 2000, it now surpasses that average by a sizeable margin.

 

The OECD has accompanied and supported Poland every step of the way

 

OECD analysis and policy advice have contributed to shaping this successful economic and social transformation.

 

Since 1990, under the Partners in Transition Programme, the OECD accompanied Poland in its key reforms. We have been supporting Poland’s efforts to foster competition and trade, fight corruption, adopt responsible business conduct and find solutions to social challenges such as ageing.

 

We have also been also working with Poland on education, governance, innovation and fostering local development. OECD studies informed the “National Strategy of Regional Development 2010-2020” and the “National Urban Policy in 2023”. Our analysis of the governance of land use in the city of Lodz will support efforts to reinvigorate its economy, with recommendations which apply also to other cities.

 

Ours is a true partnership. All OECD Members and candidate countries can learn from Poland’s rapid economic development and its resilience to international shocks like the financial crisis. The OECD benefitted from Poland’s expertise helping transition economies, particularly post-communist countries. And Poland has led and directly supported the OECD’s work with the Eurasia region, especially Ukraine.

 

However, the current development model has reached its limits

 

However, despite its economic achievements, Poland’s catch-up potential with more advanced OECD economies remains substantial. In 2015, its productivity, as measured by GDP per hour worked, was 39% below the OECD average.

 

Despite important improvements in schooling outcomes, average skills of adults are well below typical OECD levels. Vocational education has failed to provide many students with solid basic skills and is not always aligned with labour market needs. And the boom in tertiary education has delivered uneven quality. Meanwhile, the widespread use of irregular and temporary contracts is an impediment to faster productivity and wage growth and access to training.

 

Despite important improvements in transport, energy and ICT infrastructure, a lack of integrated planning and capacity at the local level has hampered infrastructure investment. Ageing coal-based electricity generation capacity and household heat production contribute to low energy efficiency and exposes Polish citizens to health hazards associated with air pollution, which exceed the OECD average.  Reliance on coal is also a major obstacle to meet international emissions commitments.

 

Poland lags substantially behind many other OECD countries on the technology content of its exports, and cannot yet compete with the top OECD economies on innovation outputs such as patents and top scientific research publications. 

 

To close these gaps, it will not be possible for Poland to compete mainly on the basis of competitive labour costs, as it has done so successfully in the past. Poland needs to move up the ladder and specialise in knowledge-intensive, higher-value-added activities.

 

Aware of these challenges, the government has laid out a “Plan for Responsible Development” to strengthen investment in R&D and innovation, ease market entry and growth for innovative start-ups and spread the benefits of economic development more widely. The new Ministerial Council for Innovation along with a re-vamped financial institution, the Polish Development Fund, are tasked with better coordination and more effective support in the earlier and riskier stages of the innovative process, which had often been neglected in the past. A large-scale programme to provide for lighter business regulation is set to ease firm entry and improve tax regulations that have long been identified as the Achilles heel of the Polish business environment. Innovative start-ups will find it easier to thrive. These initiatives in the Plan are driving Poland in the right direction!

 

New drivers of growth for an inclusive and knowledge-based economy in Poland

 

In our Better Policies Series document, we propose to Poland how to build on these efforts to develop new drivers of growth for the next 20 years. 

 

Our recommendations will sometimes be challenging to implement. But the return can be substantial: they have the potential to lift GDP per capita by between 2% to 3% over the next five to ten years through higher productivity and employment and by boosting Poland’s innovation capability.

 

Let’s start by looking at the business expenditure on R&D: in 2014 it was equal to only 0.44% of GDP, far below the OECD median. Poland also performs rather poorly when it comes to innovative entrepreneurship. To improve, the government should facilitate good practice exchange and entrepreneurship networks in higher education. It should also provide more financial resources and incentives to support the commercialisation of academic research. Shifting from direct support for R&D and innovation towards a mix of grants and market-based measures would also help unleash innovation.

 

New business creation can also make a critical contribution. But this requires the right incentives. Identifying and abolishing regulations that unduly restrict competition or put unnecessary regulatory burden on firms is vital. The stringency of Poland’s product market regulations remains above the OECD average, although it has declined significantly over the last decade.

 

The shift to a knowledge-based economy also means upgrading telecommunication and information technology infrastructure. And the shift will, of course, affect the way the economy operates. Some sectors of the economy will grow while others decline. To ensure no-one is left behind, Poland needs strong labour market and social policies, and it needs to equip people with relevant skills.

 

Which is why the OECD recommends scaling up adult education programmes, and putting suitable incentives in place for employers to invest in education and training. A special focus is needed on older people and on remote rural areas, where basic skills deficiencies are high. To invest in the skills of older workers, the recognition of prior learning could be improved. In addition, it is important that Poland stays the course on the current 9-year comprehensive education policy as it has led to sizeable improvements in education outcomes.

 

These are just a few of the issues addressed. The report is full of recommendations to help Poland continue its success story long into the future.

 

Ladies and gentlemen, the Polish Nobel-prize poet Czesław Miłosz once said that “the voice of passion is better than the voice of reason. The passionless cannot change history”. Poland has transformed its history both with passion and with reason over the last two decades, and the OECD is proud to have played its part in this journey.

 

It is with the same passion that we are ready to continue to help Poland confront the challenges of the next 20 years. These reforms won’t be easy, but there is no choice but to tackle them. The OECD stands ready to continue supporting Poland every step of the way. Together, let’s design, develop and deliver better policies for better lives in Poland.