Yesterday afternoon, I attended a presentation at the World Bank in Warsaw of its Doing Business 2012 (www.doingbusiness.org). This is the annual survey of the ease of doing business in 183 countries in which, as I mentioned here in Trading Places, Poland was ranked at a rather disappointing 62nd. To put this in context, 12 EU countries appear in the top 30 places (including the Baltic states) and only the Czech Republic, Romania, Italy and Greece among EU countries rank lower than Poland. To be fair, Poland has made some positive changes since the survey began and, indeed, it is in 6th place among EU economies that have improved business regulations since 2005. The purpose of the meeting, arranged by the BPCC, was to discuss what initiatives might be undertaken to prompt the Polish government to accelerate the pace of change.
Of the ten areas looked at by the World Bank, Poland did perform well in two: obtaining credit and protecting investors – that is legal provisions protecting minority shareholders rather than the wider concept of protecting investors and their investments – but did particularly badly in ease of starting a business, ease of paying taxes and dealing with construction permits. The World Bank’s findings were certainly reflected in the experiences of those CEOs attending the meeting. Particular recurring issues include the speed – or rather the lack of speed – in the judicial process, statutory time limits for issuing decisions being regularly exceeded, and the time required to perform simple tasks. While Poland has a competitive rate of corporation tax, this is undermined by the scale of the bureaucracy connected with monthly tax returns. The fact that some 40,000 enterprising Poles have established businesses in the UK since Poland joined the EU is proof positive that the overall ease of being able to establish and operate a business and a climate of stability, transparency and predictability will generally trump any single favourable factors such as corporate tax rates.
What is to be done? It is to be hoped that the government would be spurred on to further reform by the simple fact of its rather dismal ranking. That aside, the World Bank has its own list of recommendations which includes shortening and enforcing statutory approval limits when processing construction and occupancy permits – the law provides for 60 days but on average the process takes 190 days and involves twice as many procedures as the EU average – and streamlining the process; greater use of electronic filing of tax returns and a simplification of the forms to make them better suited to electronic filing and the provision of more user-friendly software; the unification of company and statistical numbers into a single company identification number issued by the company registration court, the further development of electronic company incorporation with standard articles of association and the elimination of the minimum capital requirement.
On a positive note, it was agreed that to present to the government straight forward solutions that do not involve significant cost was most likely to meet with success. Once this process has begun then particular changes in law could be looked at – such as introducing the concept of the mortagee in possession would dramatically improve the position of the mortgagee seeking to enforce its mortgage and thus the security of mortgages. In this regard, one very simple change – which should involve no additional cost – would be in arranging court timetables. In England, when a case is set down for trial, the likely length is estimated and the appropriate number of (consecutive) days is set aside. In Poland, by contrast, the first hearing date is set, typically many months in advance, following which there is usually a gap of months between each subsequent day of hearing. Once the illness of witnesses and judges is added in to the mix, then even simple cases take years to resolve. Organising judicial time tables effectively and enforcing the existing statutory time limits for administrative decision making at every level would greatly improve the business climate and cost the government virtually nothing.
Why does any of this matter? It matters because the greater the ease of doing business the more business will be done and the greater the prosperity of us all. And, as the recipient of vast amounts of money from the EU – generated by the taxes levied on business and individuals throughout the EU – Poland has a responsibility to respond in kind by creating an environment in which business can develop and prosper. If not, Poland faces a grim future when that money runs out, as it surely will.