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U.S. DEPARTMENT OF STATE
POLAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                              POLAND

                     Key Economic Indicators
                    (Millions of U.S. dollars)


                                    1992      1993       1994

Income, Production and Employment:

Real GDP (1990 prices)            56,305    58,474     61,105
Real GDP Growth (pct.)               2.6       3.8        5.1
GDP (at current prices)           84,323    85,759     88,559
GDP By Sector:  (pct.) 1/
  Agriculture                        6.8       7.0        6.5
  Energy/Water                       N/A       N/A        N/A
  Manufacturing                     38.0      32.9       37.6
  Construction                       8.6       7.0        10
  Rents                              N/A       N/A        N/A
  Financial Services                 N/A       N/A        N/A
  Other Services                     N/A       N/A        N/A
  Government/Health/Education        N/A       N/A        N/A
 Net Exports of Goods & Services     N/A       N/A        N/A
Real Per Capita GDP (1990 base)    1,468     1,520      1,585
Labor Force (000s)                17,329    17,321     17,320
Unemployment Rate (pct.) 2/         13.6    15.7/16.4    16.7

Money and Prices:  (annual percentage growth)

Money Supply (M2)                   56.5      37.0       34.0
Base Interest Rate                    38        35         31
Personal Saving Rate                22.4      20.7        N/A
Wholesale Inflation                 31.5      35.9       21.9
Consumer Price Index                44.3      37.6       27.0
Exchange Rate (PZL/USD)
  Official                          28.8      33.1       30.1
  Parallel                          27.2      31.8       28.8

Balance of Payments and Trade:  (USD millions)

Total Exports (FOB)               13,187    13,471     14,280
  Exports to U.S.                  374.4     410.7        650
Total Imports (CIF)               15,913    15,761     16,126
  Imports from U.S.                636.6     974.5        960
Aid from U.S.                        179        96         75
Aid from Other Countries             270       370        330
External Public Debt              47,044    47,246     41,000
Debt Service Payments (paid)       2,393     2,509      2,000
Gold and Foreign Exch. Reserves
   (end of year/USD billions)       4.20      4.28       6.07 3/
Trade Balance                     -2,726    -2,290     -1,846
  Trade Balance with U.S.           -262.2    -563.8     -310.0


N/A--Not available.

1/ In some cases the statistical systems and methods applied in
Poland differ from those used in U.S.  The GDP by sectors is 
presented in Polish statistical publications as follows:
                                  1992      1993      1994
    Industry                       39.6      32.9      37.6
    Agriculture                     7.3       7.0       6.3
    Construction                   11.2      11.3      10.0
    Transportation/Communications   3.5       3.5      n/a
    Trade                          15.0      15.0      n/a
2/ Basis of calculation changed in December 1993.
3/ End of August 1994.



1.  General Policy Framework

    In 1994 the Polish economy continued its strong recovery
from recession.  Most of the trends seen in recent years
continued.  Statistically, industrial output was the
fastest-growing sector of GDP, pulling along the rest of the
economy (most economists believe growth of the services sector
was also strong, but this is not adequately measured by Polish
economic statistics).  Agriculture remained handicapped by its
structural problems and its output was depressed by drought for
the second time in three years.  Inflation remained high, but
once again was lower than in the previous year.  One important
change was that the trade deficit was substantially less than
in the last two years, largely because of strong growth of
exports, particularly to the former Soviet Union.

    After a year of government by the post-communist coalition
which came to power after the 1993 elections, the main outlines
of economic policy remain unchanged.  Despite many pressures
from its supporters for increased spending, the government has
held the line on deficit spending.  However, progress on
privatization and other structural reforms has been slow and
uncertain.  A number of sectors highly attractive to foreign
investors have so far been held off the market, including
telecommunications and the tobacco industry.

    Monetary policy remains in the hands of the National Bank
of Poland (NBP), which continues to focus on control of
monetary aggregates to maintain economic stability and reduce
inflation.  The main challenge the NBP faced in 1994 was to
restrain money-supply growth caused by the rapid build-up of
foreign exchange reserves.

    Poland's main foreign economic policy goal remains
membership in the European Union.  Together with Hungary,
Poland filed an application for membership in the EU in April,
1994.  Poland's association agreement with the EU, signed in
1991, was finally ratified by the EU and came into force in
1994, although this was largely symbolic, since the trade
provisions had been provisionally applied since 1992. 
Relations with the EU warmed considerably, but remained
strained by the EU's reluctance to speed integration of Poland
or to open some of its most protected markets to Polish
products.  The Polish government continued to seek an end to
anti-dumping actions by the EU, as well as improved market
access for Polish food products, coal, steel, and textiles. 
Poland's imposition of a variable levy on a number of
agricultural products has been hotly protested by the EU,
although the levy seems to have had minimal impact on trade. 
It is uncertain whether this is because, as the Polish Ministry
of Agriculture claims, it covered very little trade, or because
the mechanism was designed in a way that made it highly
vulnerable to fraud, or if the bulk of covered imports were
always for processing and re-export, and subject to drawback of
the levy.

    Poland completed negotiation of a Uruguay Round tariff
schedule and signed the Marrakesh Agreement in April, 1994. 
However, the United States and several other trading partners
used the related process of Poland's re-accession to the GATT
to continue negotiations seeking further concessions on a few
items.  The Polish government has indicated it will not seek
ratification of the Marrakesh Agreement until GATT re-accession
is completed, changing Poland's status from a non-market to
market economy, and its schedule of concessions from
quantitative import quotas to a bound tariff schedule.

    A major component of Poland's economic recovery has been
the sale of goods to non-residents visiting Poland.  Estimates
of this trade range as high as over $4 billion a year (about
five percent of GDP).  Because of the relatively low price of
gasoline in Poland (about $1.75/gallon, versus $3.50/gallon in
Germany), there is essentially no cost for Germans living up to
300 kilometers from Poland to come shopping in Poland.  For the
last three years, Germans have come to Poland by the millions
to buy food, clothing, and gasoline.  In 1994, it became
increasingly evident that Russians were also engaging in this
trade, although they were often importing as well as exporting,
and while the Germans came looking for bargains, the Russians
often were looking for imported luxury goods, such as designer
fashions and household appliances.  Receipts from this trade,
recorded in the Polish balance of payments as short-term
capital flows, are the largest source of the increases in
Poland's foreign exchange reserves seen since mid-1993.


2.  Exchange Rate Policies

    The zloty has been internally convertible for all current
transactions since January, 1990.  This includes full
repatriation of profits on foreign investments.  Since October,
1991 the NBP has managed the exchange rate through a crawling
peg mechanism.  This devalues the zloty by small daily
increments (currently totalling 1.5 percent per month) to
offset domestic inflation and keep Polish exports competitive. 
Exporters have long felt that the rate of devaluation was too
slow, although their pressures for faster devaluation have been
weaker this year than in the preceding two years.  The exchange
rate is set against a basket of reserve currencies, currently
the dollar (45 percent), the D-mark (35 percent), sterling (10
percent), and the French and Swiss francs (five percent each). 
Zloty rates against individual currencies fluctuate in
accordance with changes in cross rates within the basket.

    Capital transactions remain controlled.  A license from the
NBP is required for Poles to receive foreign credits, except
for credits up to $1 million to be used to purchase goods or
services abroad.


3.  Structural Policies

    Prices:  Most subsidies and controls on the prices of
consumer goods have been eliminated.  Subsidies remain on a few
items, including pesticides and fertilizers.  Prices for fuel,
public transportation, and rents for publicly owned housing
(the bulk of the housing stock) are set administratively. 
Housing rents are set well below the cost of maintaining the
buildings.  There is an anti-monopoly office, responsible for
policing the competitive practices of Polish enterprises and
keeping them from exploiting their monopoly positions on the
domestic market.

    Taxes:  Although many administrative problems remain,
Poland has been highly successful in introducing a modern tax
system.  The largest source of government revenue is the
value-added tax introduced in 1993, and the second-largest is
the personal income tax introduced in 1992.  Customs duties
remain a significant source of revenue, contributing about nine
percent.

    Regulatory Policies:  Any person or firm registered as a
business may engage in foreign trade.  State-owned trading
companies compete with private traders.  Many of the state
trading companies have been privatized, and one, Elektrim, is
Poland's largest private company.

    Few restrictions are placed on foreign trade, except on
items in strategic areas.  Import licenses are required only
for the import of radioactive materials, munitions and military
goods, internationally-controlled strategic items, fuel,
cigarettes, and liquor.  Imports of some high-proof spirits,
cars over ten years old, and commercial vehicles and farm
machinery over three years old are banned.

    Export licenses are required for products in the following
areas:

    --petroleum products: fuels for engines other than
    aircraft; fuel for self-ignition engines; fuel oil;

    --metals: non-ferrous scrap; lead, aluminum;

    --soil products: nitrogenous fertilizers; peat and peat 
    products; phosphatic fertilizers; potassic fertilizers;

    --plastics: polyethylene; polypropelene; copolymer
    ethylene; propylene;

    --polyvinyl chloride;

    --synthetic rubber and synthetic fiber;

    --chipboards; wood cellulose; waste paper;

    --preserved and half-tanned hides;

    --munitions;

    --internationally controlled strategic goods.

The export of live geese and goose eggs is banned.  The law
does not distinguish between foreign and domestic investors for
purposes of trade.


4.  Debt Management Policies

    In 1994 Poland concluded a debt-reduction deal with its
London Club group of commercial banks.  This reduced its debt
to foreign commercial banks from $14.4 billion to $8 billion,
and stretched out repayment to 2024.  Poland had previously
rescheduled its debt to the Paris Club group of Western
official creditors.  In 1994 the Paris Club executed the second
(and last) tranche of its 50 percent reduction of Poland's
official debt.


5.  Significant Barriers to U.S. Exports

    U.S. exports have been disadvantaged by Poland's
association agreement with the EU because of the tariff
preferences given to the EU by the trade provisions of that
agreement.  However, the damage was alleviated by a package of
concessions implemented by the Polish government in 1993. 
Additional relief is provided in Poland's Uruguay Round tariff
schedule and the tariff schedule still being negotiated for
Poland's GATT re-accession.

    Standards of testing, labelling, and certification in some
cases have presented barriers to U.S. exports.  In some cases
they are more rigid and specific than equivalent regulations in
Western countries.  Existing regulations are being revised to
reflect Poland's new open trade regime and to conform to EU
standards, but periodically modifications are introduced which
are quirky, hard to understand, and difficult to comply with. 
Standards enforcement remains in need of improvement.  The
Ministry of Health's Central Inspectorate of Sanitation
(Sanepid) inspects and tests food and cosmetic imports to
ensure they meet health standards.  Sanepid has been
overwhelmed by the increase in food imports since 1990, and
much food enters the Polish market without inspection.  U.S.
firms have not encountered difficulties getting approval to
sell pharmaceuticals in Poland, providing the products have
been approved for sale in Western countries.

    Service Barriers:  Foreign banks are permitted to establish
subsidiaries in Poland, either wholly-owned or in partnership
with Polish investors.  Out of a feeling that there are already
too many small banks in Poland, the NBP has sought to pressure
foreign banks to buy ailing Polish banks instead of opening new
subsidiaries.  While the law provides for foreign banks opening
branches in Poland, the NBP dislikes the regulatory
complications of this form of organization and is unlikely to
license branches in the near future.

    Foreign insurance firms are able to enter the Polish
market.  Foreign companies are prominent in the travel and
tourism industry, but entry is regulated by the Ministry of
Industry and Trade.

    Investment Barriers:  The present law on foreign investment
aims at creating a level playing field for foreign investors,
and eliminated most of the investment incentives previously
granted.  Requirements for incorporating foreign-owned firms
are now the same as for Polish-owned firms.  Foreigners are
limited to investing via corporations, not partnerships or sole
proprietorships.

    One hundred percent foreign ownership is permitted.  No
registration of an investment with the government is required,
nor is any screening applied, except in the following cases:

    --Real Estate:  Foreign acquisition of real estate, by
purchase or long-term lease, or foreign acquisition of 49
percent or more of a Polish enterprise owning real estate,
requires a permit from the Minister of the Interior. 
Foreigners may lease forests and agricultural land for up to 99
years, but may not buy it outright.  Reports to parliament show
that several thousand permits are applied for each year.  While
a majority are issued, a substantial number are refused.

    --Strategic Industries:  A permit from the Minister of
Privatization is required for foreign investment in: 

       -operation of sea- or airports;
       -real estate agency transactions;
       -defense industries;
       -wholesale trade in consumer goods;
       -performance of legal services.

A permit can only be denied when a proposed investment would
threaten the economic interests of the state or state security.

    Present law provides only limited incentives for foreign
investment.  An investor may apply to the Ministry of Finance
for a tax holiday if his equity exceeds ECU 2 million and one
of the following conditions is met:

    --The company will operate in regions of high structural
    unemployment;

    --The company will introduce new technologies;

    --The company will export at least 20 percent of its output.

However, the Ministry of Finance takes the position that even
if these conditions are met, granting of a tax holiday is at
its discretion.

    In addition to the tax holidays provided in the foreign
investment law, the Polish government has used provisions of
the customs law providing duty free entry for parts and
components of goods to be assembled in Poland as an incentive
for foreign investors.  This has been especially significant in
the automobile industry, where the government has sought
partners for its many financially ailing car and truck
factories.  Beneficiaries of tariff rate quotas to import
automobile, truck, or bus parts and components have included
Fiat, Opel, VW-Skoda, Peugeot, and Volvo.

    Poland is eligible for political risk investment insurance
and credit guarantees from OPIC, and for EXIM Bank export
credits and guarantees.

    Government Procurement Practices:  Improvement of
government procurement practices is an important issue for the
Polish government.  It is preparing a new law governing
procurement.  Large procurements are already usually done by
some sort of tender process, but in the absence of a law or
regulations there are often questions about the procedures
used.  Poland has not signed the GATT Code on Government
Procurement because of inconsistencies in its legislation.  It
may sign the code after adoption of the new legislation.

    Customs Procedures:  The Polish Customs Service has been a
leading victim of economic reform.  The rapid growth of imports
over the last four years, as well as the proliferation of
traders, has strained Customs' capabilities.  Customs'
facilities and personnel are overloaded by the volume of cargo
they must process.  The competence of personnel is not high. 
Communications between headquarters and field offices is poor,
leading to inconsistent application of the rules.  The greatest
problems have occurred at road crossings on the German border,
where officials are overwhelmed by the volume of traffic
entering Poland, much of it in transit to the former Soviet
Union.  Poland signed the GATT Customs Valuation Code in 1989. 
While it has never been ratified, the substance has been
incorporated into Polish customs law.


6.  Export Subsidies Policies

    Poland has signed the GATT Subsidies Code, but never
ratified it.  Present plans are to ratify the new code embodied
in the Uruguay Round.  Poland has eliminated its past practices
of tax incentives for exporters, but it still offers some tax
holidays to foreign investors who plan to export.  A new law on
restructuring the sugar refining industry has the potential for
creating export subsidies for sugar, financed out of high
domestic prices.


7.  Protection of U.S. Intellectual Property

    Intellectual property is an area of concern, particularly
in copyright matters.  However, the Polish government has made
major strides in improving protection.  The enactment of a new
copyright law in February 1994 gave it a complete set of modern
intellectual property laws.  Full adherence to the 1971 Paris
Act of the Berne Convention in July, 1994 was also an important
step in guaranteeing protection to foreign authors.  There is
still a question whether the new copyright law protects the
rights of foreign producers and performers of sound
recordings.  Ultimately, entry into force of the Uruguay Round
TRIPS agreement will guarantee that protection, but in the
meantime there is a question, which the Polish government could
remove by reversing its position and signing the Geneva
Convention on Phonograms.


8.  Worker Rights

    a.  The Right of Association

    The Polish government has ratified Convention 87 of the
International Labor Organization (ILO).  Laws concerning
employment, trade unions and collective bargaining were revised
in early 1991.  Currently, all workers, including the police
and frontier guards, have the legal right to establish and join
trade unions of their own choosing, the right to join labor
federations and confederations, and the right to affiliate with
international labor organizations.  Independent labor leaders
reported that these rights were largely observed in practice.

    Regarding the right to strike, the Trade Union Act of 1991
is less restrictive than the 1982 version passed soon after
imposition of martial law, but still prescribes a lengthy
process before a strike can be launched.  When strictly
observed, the law provides several opportunities for employers
to challenge a pending strike, including the threat of legal
action.  An employer must start negotiations the moment a
dispute begins.  In August 1994, the government announced that
this process would be shortened.

    Under existing law, negotiations end with either an
agreement or a protocol describing the differences between the
parties.  If negotiations fail, a mandatory mediation process
ensues; the mediator is appointed jointly by the disputing
parties or, absent agreement between them, the Ministry of
Labor and Social Policy.  If mediation fails, the trade union
may launch a warning strike for a period of up to 2 hours or
seek arbitration of the dispute.  Both employers and employees
have frequently questioned the impartiality of the mediators.

    A full-fledged strike may not be launched until 14 days
after the dispute is announced (strikes are prohibited entirely
in the Office of State Protection, in units of the police,
firefighters, military forces, prison services and frontier
guards).  If the strike is organized in accordance with the
law, workers retain their right to social insurance benefits
but not pay.  If a strike is "organized contrary to the
provisions of the law," workers may lose social benefits and
organizers are liable for damages and may face civil charges
and fines.  Laws prohibiting retribution against strikers are
not consistently enforced; the fines imposed as punishment are
so minimal that employers can easily afford to pay them.

    In September 1994, the government announced that
legislation proposing important changes in existing laws
governing trade unions, employers and the resolution of labor
disputes would be sent to the Sejm before the end of the year. 
Senior officials proposed re-defining a "legal" strike to
prohibit "occupation," hunger and "political" strikes as well
as raising the threshold necessary for a successful strike vote
to a minimum of 50 percent of all enterprise workers.  The
government also announced its intention to raise the number of
workers necessary to form a trade union.

    These and other proposals grew out of the government's
"strategy for Poland," announced in June, 1994, which included
a comprehensive attempt to adapt the many existing, and
outdated, laws governing labor activity to Poland's emerging
market economy.  In August, the government sent a revised labor
code to the Sejm under the "strategy" framework, in effect
abandoning the landmark February 1993 "State Enterprise Pact,"
which had set forth a detailed framework for dealing with
labor-related issues and to which the unions, employers and
government had agreed.  In the interim, legal ambiguities
continued, leading to some labor tensions.

    b.  The Right to Organize and Bargain Collectively

    Poland has ratified ILO Convention 98 on the right to
organize and bargain collectively.  The 1991 law on trade
unions created a favorable environment to conduct trade union
activity through provisions for time off with pay, as well as
facilities and technical equipment in the enterprise, provided
by the employer.  In August, the government announced its
intent to reduce some employer-provided, union-related costs in
enterprises which have a large number of unions (some
have as many as 50).

    Notable weaknesses included weak sanctions for anti-union
discriminiation.  Polish law also lacked specific provisions to
ensure that a union has continued rights of representation when
a state firm undergoes privatization, commercialization,
bankruptcy, or sale.  Labor leaders claimed that this ambiguity
led to underrepresentation of unions in the large and growing
private sector.  There were also a number of confirmed cases
where Solidarity activists were dismissed for labor activity
permitted under Polish law, including organizing strikes.

    Unions, management and workers' councils currently set
wages in ad hoc negotiations at the enterprise level. 
Collective bargaining as a system of industrial relations is
expected to encompass an ever larger percentage of the
workforce.  By fall 1994, both unions and employers were
preparing themselves for such a relationship.  During 1994, the
government repeatedly stated its intention not to be drawn into
labor disputes, as has been the tendency historically.

    The government continued its ceiling on wages in state and
private enterprises (except May-August when the Sejm and the
President disputed the law) by means of a penalty tax, the
so-called "neo-popiwek."  In an attempt to link wages to
increased productivity and reduce inflationary pressures in the
state sector, the government charged a penalty to any firm
(which does not produce for export) that increased its average
wage in excess of a government-set "coefficient."  Enforcement
of the neo-popiwek effectively discouraged enterprise or
sectoral-level collective bargaining on wages.  Both Solidarity
and OPZZ challenged the tax in the Polish constitutional court.

    Current government policy aims to liberalize investment
procedures for both domestic and foreign firms rather than
promote special incentive programs.  Special duty-free zones
exist in or have been contemplated for some  5-20 locations
throughout Poland but, with the exception of one zone in Poznan
and one in Mielec (in south-eastern Poland), have not attracted
much attention.  Thus, traditional export processing zones that
relax legal guarantees do not, at this time, comprise a threat
to workers' rights to organize.  However, collective bargaining
either does not exist there or is in its early stages of
development.

    c.  Prohibition of Forced or Compulsory Labor

    The Polish government has ratified Conventions 9 and 105 of
the ILO on forced labor.  Compulsory labor does not exist in
Poland, although it is not prohibited by law.  Drafts of the
new constitution proposed by some political parties contained
explicit prohibitions, but a new constitution is not expected
to be approved until 1995.

    d.  Minimum Age for Employment of Children

    Poland has ratified ILO Convention 138 on child labor.  The
labor code forbids employment of persons under the age of 14. 
Persons aged 14-18 may be employed only if they have completed
basic schooling and if the proposed employment constitutes
vocational training and is not harmful.  The age floor rises to
18 if a particular job might pose a health danger.  The
government enforces legal protection of minors, but its
inability to monitor the growing private sector, which now
accounts for some 60 percent of all Polish employment, leaves
officials less certain the problem does not exist.

    e.  Acceptable Conditions of Work

    A national minimum wage is negotiated every 3 months on a
tripartite basis by the government, employers and the trade
unions.  Minimum wages for state-owned enterprises were roughly
$90 (ZL 2,050,000) per month at the October 1 exchange rate,
which was insufficient to provide a worker and family a decent
living.  Minimum wage has the force of law, but a significant
number of foreign guest workers received less than the minimum
wage, especially in the construction amd agricultural sectors. 
The average gross monthly wage rose in 1994 to roughly $220. 
Despite several recent annual increases in GNP, however, real
wages declined.

    The Polish legal code defines minimum conditions for the
protection of workers' health and safety.  Enforcement is a
growing problem because the state labor inspectorate is unable
to monitor the increasing portion of Polish economic activity
which is in private hands and where a growing percentage of
accidents take place.  In addition, there is a lack of clarity
concerning which government or legislative body is responsible
for enforcing the law.  In 1993, 655 work-related deaths were
reported, representing a slight upward trend over 1992.  The
government itself has noted that work conditions in Poland are
poor and sanctions are minimal.  Standards for exposure to
chemicals, dust, and noise are routinely exceeded.

    f.  Workers Rights in Sectors of U.S. Investment

    As with the rest of the Polish private sector, it is
impossible to comment authoritatively on workers' rights
because of inadequate monitoring.  Although there were
labor-management disputes in firms with U.S. investment in
1994, there was no consistent pattern and none were protracted
or serious. 




  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                               0
Total Manufacturing                                   232
  Food & Kindred Products                    95
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                4
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           (2)
  Transportation Equipment                    0
  Other Manufacturing                       (1)
Wholesale Trade                                       -22
Banking                                               (1)
Finance/Insurance/Real Estate                         (1)
Services                                                2
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  256       

(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000

Source: U.S. Department of Commerce, Bureau of Economic Analysis

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