What Matters

Nothing matters very much and few things matter at all. So thought that most languid of prime ministers, Arthur Balfour, who succeeded as prime minister his uncle Robert (that’s the third Marquess of Salisbury to you and me) the origin, in case you were wondering, of the English expression: and Bob’s your uncle, and, lest you thought history was bunk, the author of the Balfour Declaration whose consequences are very much with us today. But is Poland’s rank in the World Bank’s Doing Business ranking one of those things that matter at all?

According to Marcin Piątkowski, the World Bank’s senior economist for Poland, it is something the Polish government takes seriously. At a meeting at the British Polish Chamber of Commerce to discuss this year’s rankings (the report may be downloaded here) he said that the Polish prime minister, Ewa Kopacz, had said that she wants Poland to be in the top 20 soon. This compares to Poland’s 2015 ranking of 32, down from 30 last year, but still above the EU average, ahead of its eight regional peers, and well up, after years of constant improvement, from its position when the rankings first started. Singapore was ranked at number 1, Denmark at number 4, the United Kingdom at number 8, with 20 EU countries ranking in the top 50 of the 189 countries surveyed.

This ranking is interesting because it focuses on the private, SME sector, and applies 11 standardised criteria to look at what happens in practice rather than on what ought to happen. The survey does not measure the labour market, labour force skills, corruption or macro-economic factors but at the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation. Poland has made notable improvements this year under the getting electricity, registering property and trading across borders headings but still languishes at 137th for dealing with construction permits, 87th for paying taxes, and 85th for starting a business. One remarkable improvement is promised from the government – that in disputes between the taxpayer and the tax authorities, the presumption will be that the tax payer is innocent. Let’s hope the message percolates through the bureaucratic sub-strata.

Later this year, the World Bank will apply those same criteria on a sub-national basis within Poland, based on the 18 largest regional cities, enabling investors to pinpoint the most favourable locations for new business both within a country, and across the world, on a consistent basis. This should create healthy completion as regions complete to create the most business friendly environment. Ultimately, of course, a ranking is only an indication and is, of itself, unlikely to be decisive. Nor does the position in the ranking show the distance between a country’s actual performance and the ideal. In Poland’s case, especially far from ideal are the bureaucracy and the court system.

As the discussion broadened out to include HMA Robin Barnett; Michał Mrożek, CEO, HSBC Poland; Professor Witold Orłowski, chief economic advisor of PwC, and Antoni Reczek, chairman of the board of the BPCC, some common concerns were expressed. Behind the politicians’ complacency about Poland’s considerable progress over the last 25 years, there lurks the reality of a job unfinished, a future inadequately prepared for. The bureaucratic mentality has not adopted to the new environment as quickly as has the private sector and Poland did not have the mass clear out of the old systems that had such an impact in the Baltic States.

The challenge for Poland is to innovate up the value chain and to create an environment in which innovation is able to thrive, something at which the UK has been very successful, especially in the R&D sector. Indeed, Poland’s deciding not to join the single European patent system has simply resulted in more talented Poles moving to the UK to do so, contributing to demographic and brain drain which is becoming increasingly apparent in Poland. All government can do is to create an attractive environment for business and innovation. This means listening to foreign investors – FDI can go anywhere – and the UK is a good listener.

Poland must also adopt a more global outlook. This means getting rid of the “foreigner” label, breaking the links between old university professors and the bureaucracy, opening the universities and the bureaucracy up to the English language so that there is greater exposure to up to date learning and practice. Europe’s share of global GDP is declining, so being able to compete globally is vital. Poland did well over the last 25 years, but it needs to do much more to survive in tomorrow’s increasingly competitive “innovate or die” environment.

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