2.2 Polish - German economic relations


2.2 Polish “German economic relations

How did Polish “German economic relations develop in the 1990s, after the start of the reforms in Poland and the reunification of Germany? Has the cooperation been mutually satisfactory? Should Germany be viewed as Poland s most important economic partner? Do the existing legal and political foundations permit the optimization of economic cooperation between the two countries ?

This section addresses all these questions, although the asymmetry between the two countries economies and the huge part played by Germany in European integration, especially in the context of Poland s EU bid, make the analysis a difficult task. This asymmetry applies not only to the economic capacities of the two countries, especially their GDPs, but also to their international economic relations, technological standards, quality of organization and management, competitiveness , capacity for innovation and financial reserves .

2.2.1 Foreign trade

The development of Polish “German trade relations over the past decade clearly demands a positive assessment. Poland has become one of Germany s key trading partners in Central and Eastern Europe. For German exporters, Poland is a more important market than Russia “ it is the tenth largest importer of German goods, ahead of Sweden and Japan, and its position is strengthening. Meanwhile Germany has become Poland s most important trading partner, accounting for one third of it s foreign trade compared with 14.2 per cent in 1989. Poland s exports to Germany are now greater than its combined exports to its next seven largest partners (Italy, France, the Netherlands, Britain, the Czech Republic, Denmark and the United States) and Germany accounts for more than half of Poland s trade with the EU countries. Furthermore Poland s trade with Germany has grown more substantially than Poland s overall foreign trade.

This dynamic growth is due to the following factors:

  • The transformation of Poland s economic system, including the liberalization of foreign trade and its reorientation towards the West after the decline of the former Comecon export markets.

  • Improved access to EU markets as a result of the Association Agreement (also known as the Europe Agreement) signed in February 1992.

  • Favourable economic trends.

  • The German market s relatively high capacity to absorb Polish goods.

The added significance of Germany for Poland is linked to Poland s bid to secure full membership of the EU in 2004: Germany plays a major role in the EU and its position on Polish accession will be of paramount importance. In the meantime the decisive part played by Germany in Poland s foreign economic relations has influenced the transition process in Poland and its adaptation to EU standards.

In 1995 Polish “German exports and imports were more or less balanced, with exports and imports of a little over DM12 billion and total bilateral trade of DM25 billion. This guaranteed Poland the position of Germany s top trade partner among Central and Eastern European countries, ahead of the Czech Republic and Russia. However in the second half of the 1990s there was a growing imbalance between exports and imports in favour of Polish imports from Germany. In 2000 Poland s trade deficit with Germany was DM5.1 billion, and DM3.5 billion in 2001.

Notably, Germany is the most important trading partner for most Central and Eastern European countries (Table 2.1). As can be seen, for six of the ten Central and Eastern European countries Germany is the top partner in imports, and for four it is the most important partner in exports. It is a particularly important partner for the Czech Republic, Hungary, Poland and Slovenia in terms of both imports and exports. Overall, Germany is one of the two most important economic partners for all ten Central and Eastern European countries. Another characteristic feature is that these countries trade with Germany generally shows a deficit.

Table 2.1: The CEE countries leading trading partners, CEE 1997 (percentage of total imports/exports of respective countries)

Rank

Country

Imports from

Exports to

1

Poland

Germany

24

Germany

33

2

Bulgaria

Russia

25

Italy

12

3

Estonia

Russia

23

Finland

19

4

Romania

Germany

16

Italy

20

5

Latvia

Germany

16

Russia

21

6

Lithuania

Russia

24

Russia

25

7

Slovakia

Czech Republic

23

Czech Republic

27

8

Slovenia

Germany

21

Germany

29

9

Czech Republic

Germany

32

Germany

36

10

Hungary

Germany

27

Germany

37

Table 2.2 shows Germany s position in Poland s exports and imports in comparison with its other international trading partners. The data clearly show that Poland s exports to Germany are greater than to the next seven countries combined. However Germany s position in the structure of Poland s foreign trade weakened slightly at the end of the 1990s. Table 2.3 summarizes the development of German “Polish bilateral trade since 1990.

Table 2.3: Poland s foreign trade, (percentage of total exports/imports)
 

Exports from Poland

Imports to Poland

 

1995

1999

1995

1999

Germany

38.3

36.1

26.6

25.2

Italy

4.9

6.5

8.5

9.4

France

3.6

4.8

4.9

6.8

Netherlands

5.6

5.3

4.5

3.8

Britain

4.0

4.0

5.2

4.6

Czech Republic

3.1

3.8

3.1

3.2

Denmark

3.0

2.8

2.2

2.0

United States

2.7

2.8

3.9

3.9

Throughout the 1990s bilateral trade between Poland and Germany grew steadily, as reflected in the consistent increase in the value of total trade. However Germany s exports to Poland grew at a much faster rate than its imports from Poland. As a result Poland continuously recorded a trade deficit with Germany, especially in the second half of the 1990s. This cumulative deficit far exceeded the value of Poland s annual exports to Germany in the 1990s, so Poland had to strive to balance its exports and imports without restricting their overall growth. Thereafter the deficit narrowed from DM5.1 billion in 2000 to DM3.5 billion in 2001, and the expected recovery in Germany in 2002 is likely to produce a further increase in Poland s exports and a further reduction of the deficit to DM2.3 billion.

Table 2.3: Poland s trade with Germany, 1991 “2001 (million DM)

Year

Imports from

Germany

Exports to

Germany

Total bilateral

trade

Trade

balance

1991

8475

7250

15 725

“1225

1992

8233

8287

16 520

54

1993

9702

8639

18 341

“1063

1994

10 353

10 126

20 479

“227

1995

12 695

12 413

25 108

“282

1996

16 366

12 203

28 569

“4163

1997

20 669

14 347

35 016

“6322

1998

24 113

16 443

40 556

“7670

1999

24 157

18 010

42 167

“6147

2000

28 427

23 314

51 741

“5113

2001

30 025

26 514

56 539

“3511

Source : Statistisches Bundesamt, Wiesbaden, Aussenhandel, Fachserie 7.

About 17 200 Polish companies (mostly small and medium- sized businesses) exported goods and services to Germany in 1994. This figure had risen to 18 750 by the end of the decade, accompanied by growth in the range of goods exported. The number of types of goods rose from 1200 in the early 1990s to 4843 in 1994 and 5300 in 1999, a more than fourfold increase. This points to the growing popularity of Polish goods among German importers.

Exports to Germany in 2001 included most of the types of goods that Poland exports worldwide. Estimates by the economic department at the Polish embassy in Berlin, based on German statistics, show that imports from Poland in 2001 consisted of more than 5500 different goods, according to the 8-digit PCN code (Polish Combined Nomenclature). This was over half of the German import list. The unit value of more than 2500 of these products exceeded DM250 000. It is also estimated that the number of Polish exporters rose to approximately 21 500 in 2001, with a continually growing share taken by small and medium-sized private businesses manufacturing finished products. Hence 2001 saw a diversification of exports in terms of product groups, leading to a further restructuring of Poland s exports to Germany.

During the 1990s the share of raw materials and components in Poland s exports to Germany dropped to 14.4 per cent (down from 19.8 per cent in 1994), while the share of finished products rose from 71.2 per cent to 77.1 per cent. However the share of high-tech products remained low. In 2001 farm produce and foodstuffs accounted for just over 5 per cent of Poland s exports to Germany. This represented a fall, despite the higher value of these exports. A similar situation existed in the case of raw materials (under 4 per cent) and components (less than 10 per cent). Finished products with the highest rate of growth accounted for the remaining 81 per cent, up from 80 per cent in 2000. High-value-added finished products accounted for 70 per cent of the total value of exports. Sectors with the highest rates of growth included machinery and equipment, paper products, rubber and plastic products and motor vehicles (passenger cars and delivery vans). Vehicles, car engines and components, machinery and equipment promise further dynamic growth in the coming years as a result of heavy investment.

The value of Polish exports to Germany increased by DM5.3 billion in 2000 and DM3.2 billion in 2001, due mainly to the rising share of the following finished products in total exports to Germany:

  • Non-electrical machinery and equipment (PCN 84): DM3.3 billion, up 20 per cent from DM2.8 billion in 2000.

  • Furniture and lighting equipment (PCN 94): DM2.8 billion, up 2 per cent from DM2.7 billion in 2000.

  • Motor vehicles (PCN 87): DM2.3 billion, up 10 per cent from DM2.1 billion in 2000.

  • Knitted and fabric clothing (PCN 61 and 62): DM2.2 billion, up 5 per cent from DM2.1 billion in 2000.

  • Electrical machinery and equipment (PCN 85): DM2.1 billion, up 17 per cent from DM1.8 billion in 2000.

Finished products also dominate Germany s exports to Poland. Vehicles, (mainly cars) and machinery and equipment account for almost 45 per cent of the total value of these exports. Imported machinery and equipment are mostly used to launch production in Poland, including export-oriented production.

Industrial cooperation has also grown in importance over the past few years, particularly in the case of component production and product assembly to take advantage of economies of scale. Especially successful examples of cooperation can be found in the car industry. On the German side, partners include Volkswagen and Adam Opel, and on the Polish side are local automotive plants and their suppliers. Most of these plants were built or expanded through capital investment by the parent corporations. The value of Polish supplies for industrial assembly in Germany rose from DM91.4 million in 1995 to DM637.7 million in 1999, DM1608.5 million in 2000 and DM2 billion in 2001.

Outward processing traffic (OPT) is another form of industrial cooperation between Poland and Germany. Its beginnings in the textile sector, involving cutting, measuring and tailoring services, date back to the early 1970s, but over the past few years OPT has expanded to include sectors such as wood, metal, chemicals and plastics. However textiles continue to account for 30 per cent of the total value of German OPT imports from Poland. In 2000 OPT products accounted for 5 per cent of the total value of Poland s exports to Germany. In 2001 their share dropped, due to reduced interest in this form of cooperation among companies on both sides of the border. The year 2002 is likely to see a further drop in Poland s share in Germany s overall OPT, although OPT may well remain a major source of new export streams. Poland is Germany s second largest OPT partner after the United States, with a 9.7 per cent share in 2000. Other leading countries in this area are the Czech Republic, Romania, Hungary, South Africa and Ukraine.

As discussed above, in the 1990s Polish “German trade was characterized by a Polish trade deficit. The total deficit from the period 1991 “2001 amounted to DM35.6 billion, including DM32.1 billion between 1996 and 2000, when direct investment in Poland increased (capital investment in industry and trade requires the importation of technology and supplies, generally amounting to 40 per cent of the total value of the investment project). However, the deficit was relatively small compared with the value of Poland s exports to Germany and it shrank over time, falling from: 47 per cent in 1998 to 34 per cent in 1999, 22 per cent in 2000 and 13 per cent in 2001. According to Central Statistical Office (GUS) data, in 2002 Poland s trade with Germany began to show a surplus .

2.2.2 Foreign direct investment

Poland s attractiveness as an economic partner for German companies grew in the 1990s. This also applied to German foreign direct investment. According to an annual ranking published in Germany, on a scale of 1 “100 Poland received 62 points in 1998, up from 53 in 1997 and 45 in 1996. The 51 “65 point range in this classification denotes countries with a credit rating that is better than average, considering their economic situation. Furthermore the German government decided in November 1999 to upgrade Poland s rating on the five-level Hermes guarantee scale from group 3 to group 2 (up from group 4 in 1994). Group 1 includes the EU countries, the United States, Japan and several other highly developed countries.

Table 2.4: Leading German investors in Poland (cumulative investment, $USmillion)

No.

Company

Value of investment

1

Bayerische Hypo-u. Vereinsbank AG

1000

2

Metro AG

600

3

Adam Opel AG

500

4

Commerczbank AG

460

5

Reemtsma

420

6

Deutsche Bank AG

230

7

Volkswagen AG

200

8

Aral

180

9

Siemens

150

10

Dyckerhoff

140

11

OBI Heimwerkermarkt

110

The value of German direct investment in Poland increased consistently in the 1990s, especially in the second half of the decade, when Germany advanced to the top FDI position. The total value of its investment in Poland exceeded US$8 billion at the end of 2001, with a cumulative value of US$40 billion since the start of Poland s transition.

In 2001, of the top 394 foreign investors in Poland 117 were German, as ranked by the Polish Agency for Foreign Investment (PAIZ), whose list only covers investments in excess of US$1 million. At the same time there were almost 9000 German firms among the 29 000 or so joint-venture companies operating in Poland.

In contrast, Polish direct investment in Germany came to a modest DM250 million in the 1990s and mainly involved trade, services and real estate.

2.2.3 Regional cross-border cooperation

A commission for regional and cross-border cooperation was established at the Polish “German intergovernmental level in 1991. The commission comprises three sections:

  • A cross-border section that plays an informational and coordinating role, as well as initiating joint projects.

  • A section for interregional cooperation, especially cooperation among provinces , cities and communes, covering areas such as the labour market, youth exchanges, environmental protection and historical heritage protection.

  • A section dealing with joint programmes under the PHARE Cross-Border Cooperation/Interreg programme.

Euroregions are an important manifestation of Polish “German cross-border cooperation and four have been established to date:

  • The Neisse-Nisa-Nysa Euroregion (ERN), created in December 1991 to cover the border municipalities and cities of Poland, Germany and the Czech Republic.

  • The Spree-Neisse-Bober Euroregion, created in September 1993 to cover associations of Polish and German cities and municipalities.

  • The Pro Europa Viadrina Euroregion (PEV), created in December 1993 to cover an association of Polish municipalities and a German association of municipalities called Mittlere Oder (Central Oder).

  • The Pomerania Euroregion, created in December 1995 to cover the Communal Union of West Pomeranian Municipalities and the city of Szczecin on the Polish side and the Communal Union of Europaregion Pomerania on the German side. In February 1998 the Union of Skania Municipalities of southern Sweden joined this Euroregion.

Poland s 1999 administrative reform, which led to the establishment of 16 large provinces, created more favourable conditions for cooperation within the Euroregions by offering greater independence to local governments . Especially noteworthy successes of Euroregional cooperation can be found in the areas of environmental protection (for example the construction of new sewage treatment plants), infrastructure (including the construction or modernization of roads , bridges and border crossings) and scientific cooperation, as exemplified by the European University Viadrina in Frankfurt (Oder) and the Collegium Polonicum in Slubice. As the Euroregions are still in the early stages of development there are enormous opportunities for further progress in the future.




Change Management in Transition Economies. Integrating Corporate Strategy, Structure and Culture
Change Management in Transition Economies: Integrating Corporate Strategy, Structure and Culture
ISBN: 1403901635
EAN: 2147483647
Year: 2003
Pages: 121

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