Competition and labour market reforms central to boosting Poland’s economy

Poland has truly been one of the success stories of the post-Soviet era. But despite “impressive” economic growth over the last 15 years, some major reforms to the country’s business sector are required to support further progress, says a major new report from the OECD.

Labour market reforms and efforts to improve competition are both needed for Poland to continue its rise, according to the study.

In terms of the labour market, the OECD argues Poland must take steps to reduce what it calls the “deep segmentation” of the market. All contracts should be made subject to the same tax and social contribution regime, while legal dismissal procedures should be streamlined and the cumulative duration of temporary contracts limited.

“Poland has made considerable progress in transforming the structure of its economy, making it more competitive and bringing about convergence in living standards with other European countries,” OECD secretary-general Angel Gurría commented.

“Despite this success, unemployment is still far too high, and restrictive product market regulations continue to hinder economic activity. Reforms are needed for Poland to build on its strong track record and launch itself as an innovation–based economy.”

The OECD also calls on the government of Poland to eliminate “heavy barriers” to entrepreneurship, such as by reducing the the costs of “cumbersome” procedures for setting up a company. The bankruptcy process is “lengthy and costly”, meanwhile, which is also hindering businesses. It also wants authorities to continue with privatisations and the reduction of government ownership in competitive sectors of the economy.

In addition, Poland must seek ways to improve public procurement practices, to ensure fairer competition between the public and private sectors. “Public procurement plays a key role in Poland, but public ownership may lead to non-neutrality of the bidding process, and the criteria for awarding contracts rely excessively on the lowest price. Competition is weak in network industries, apart from telecoms,” says the report.

The OECD also wants to see strengthened competition enforcement and leadership of regulatory authorities. Last month an OECD report on Russia highlighted some of the far-reaching reforms required in that country.