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Republic of Poland, 1 MBA 6100

Republic of Poland

Souvik Biswas, Sagar Churi, Christopher Pappas, and Ruth White

Master of Business Administration 6100 Dr. James M. McFillen International Business and Management

Tuesday, July 28, 2009

Republic of Poland, 2 MBA 6100 Geography: Republic of Poland, or Poland, is a country located in Central Europe. Poland shares borders with Germany to the West; with Czech Republic and Slovakia to the South; with Ukraine and Belarus to the East; and with Lithuania and Russia to the North. Moreover, the waters of Baltic Sea wash the biggest part of Northern Poland. The distance from North to South is 544 miles, while the distance from East to West is 428 miles. The total area of the country covers 120,728 square miles, 3% of which is covered by water. In addition, its coastline extends up to 305 miles. Based on data collected in 2001, 45.91% of land is used for arable purposes, 1.12% of land is used for permanent crops and 52.97 is used for other purposes (“Poland Geography,” 2005). By definition, the term arable land is used to describe the land where people grow crops like wheat and rye and the land can be replanted after each harvest. However, land used for permanent crops, like fruit and flowers, is not replanted after each harvest. Finally, the land used for other purposes includes meadows, forests, built in areas, roads, etc. The capital, Warsaw, is the biggest city of the country and is located in the East-central part of the country. The city also lies by the Vistula River. For the purposes of this study, the geographical features of the country should be further discussed. Most of the country consists of low land, however there are rivers, lakes, and mountains (“General Information”). The most famous and largest river of Poland is the Vistula River, which is 651 miles long and flows from South to North of Poland through high mountains, ending in the Baltic Sea. Other rivers of Poland are the Odra, Bug, and Warta. It is important to note that there are approximately 10,000 lakes in the country, each one of them covering an era of 108 square feet (“Poland lakes and rivers”). In addition, Poland consists of high mountains. On the Southern borders of the country there is the Polish Tartas, which is a group of mountains and consists of High Tartas and Western Tartas (“General Information”). The highest peak is called Russy and is 8,200 feet in elevation. Other groups of mountains are the Beskids and the

Republic of Poland, 3 MBA 6100 Karkonosze. It is important to note that in the Southern part of Poland a desert covering an area of 12 square miles is located. Finally, forests cover the 28% of the land. Due to its geographical and surface features “the climate has transitional character between maritime and continental climates” (“Climate,” 2005). To be more specific, in the North and West the climate is maritime, while in the in the South and East the climate is continental. In other words, winter can be mild or cold, and summers can be cool and rainy, or hot and dry. Temperatures in summers lie between 690F and 900F, while in winter temperatures lie between -40F and 300F. Geographical characteristics and features define the variety of natural sources of each country. Poland is rich in minerals and produces big quantities of: hard and brown coal, zinc, lead, silver, sulphur, rock salt, and several construction minerals. Poland is also the biggest supplier of amber. The country has a significant amount of good quality oil and natural gas deposits as well (“Natural resources”). Moreover, the geological features and the climate of the country enhance the production of several crops such as grain, wheat, sugar beets, tobacco, potatoes, fruits, etc. The total gross output of agriculture products for 2007 was 1,739 million dollars (“Concise statistical yearbook of Poland,”2008, p.299). The following table gives the quantities of minerals and fuels Poland produced in year 2007 (“Concise statistical yearbook of Poland,”2008, p.344-351).

Minerals and Fuels Hard Coal Lignite Crude oil and oils from bituminous minerals Natural gas in liquid or gas Copper ores and concentrates Native sulphur

Quantity Produced in 2007 88,2 million tones 57,5 million tones 716 thousand tones 5,625 hm3 (cubic hectometer) 33,684 thousand tones 834 thousand tones

Republic of Poland, 4 MBA 6100 Rock salt 592 thousand tones

Population: Based on the Concise Statistical Yearbook of Poland 2008, the overall population of the country was approximately 38.5 million (“Concise statistical yearbook of Poland,”2008, p.111). The heart of Poland is its capital Warsaw with a population of approximately 2 million citizens (“Warsaw in brief”). Other than Warsaw, big cities of Poland are Lodz and Krakow with a population of approximately 750,000 citizens each (“Lodz Poland”). Most people prefer living in cities; therefore the urban population is 62%. The main religious is Roman Catholic since 89.8% of the population is Roman Catholics. In addition, 1.3% of the citizens are Eastern Orthodoxies and 0.3% areProtestants. The main language spoken by 98% of the population is Polish. Moreover, the population density in 2008 was122 people per km2 and the fertility rate was 1.23 children per woman (“Poland Population,” 2005). Further, the birthrate for the same year was 10.01 births per 1,000 citizens and the death rate was 9.99 deaths per 1,000 citizens. It is also important to know the life expectancy of the population. The life expectancy for the male population was 71.42 years, while for women was 79.65 years. The total life expectancy was 75.41 years. The following table shows in detail the age structure of Poland’s citizens for the year 2008 (“Poland demographics profile,” 2008).

Republic of Poland, 5 MBA 6100 Years Range 0-14 15-65 3,013,109 13,681,48 1 65-over 1,964,477 2,848,997 13,808,41 2 3,183,240 5,147,717 0.62 13.4% Male Female Sum (male and female) 5,862,106 27,489,893 Sex Ratio (males/females) 1.06 0.99 % of the total population 15.2% 71.4%

In addition, the work force of the country consists of 17.2 million citizens. To be more specific, 29% of the work force works in the industry and construction field, 16% in the agriculture, and 54% in services (“Background Poland”). The unemployment rate for the year 2008 was 12.8% (“Poland unemployment rate,” 2008). Regarding the literacy index, which shows the percentage of people able to read and write, was 99.8%. Poland shares the first place in the literacy index rank with Cuba and Estonia. Unfortunately, there is no recent data referring to the high literacy and low literacy indexes. For 1998, the high literacy index was 5.8%, and the low literacy index was 76.1%. Low literacy refers to those people who have not completed secondary education. However, these data may be much different today (“Polish education statistics”). In 2008, there were approximately 20 thousand immigrants in Poland and the majority of them were males between the age of 18 and the age of 24 (“Concise statistical yearbook of Poland,”2008, p. 131). The ethnic groups located in Poland consist of Polish by 96.7%, Germans by 0.4%, Belarusian by 0.1%, Ukrainian by 0.1 %, and other by 2.7%. Population growth rate depicts how fast the population of a particular area increases from one time period to another and it can be positive or negative. The factors to be taken into consideration in order to calculate the growth rate are: the crude birth rate, the crude death rate, and the net immigration rate. This rate is a valuable tool for governments, sociologists, marketing analysts, companies, etc (Thompson). For instance, governments need to know the growth rate in order to cover the need of the citizens regarding schools, hospitals, roads, food resources, etc.

Republic of Poland, 6 MBA 6100 The population growth rate for Poland for the year 2008 was -0.045%, which remains almost the same since 2000 (“Poland population growth rate,” 2008). Human development index (HDI) measures the human development of a country and is being published by the United Nations Development Program (UNDP) (“Human development report 2009”). Based on this index,countries are characterized as developed, developing, or underdeveloped. The factors that are taken into consideration in order to calculate this index are: life expectancy index, education index which is a function of adult literacy index and gross enrolment index; and gross domestic product (GDP). The index prices fluctuate between 0 and 1. Countries with index below 0.5 are characterized as low developing countries, while countries with indexes between 0.5 and 0.8 are characterized as medium development countries. Countries with indexes 0.8 and above are characterized as high development countries. The HDI for Poland for the year 2005 was 0.870 based on the 2007/2008 Human Development Report (“Human Development Report 2007-2008”).

Political and Legal System: Poland is having Republic parliament. The political parties in Poland represent socialdemocratic, liberal, conservative, national and populist groups as well. Legal system is based on Continental (Napoleonic) civil law and holdover Communist legal theory. Rulings of the Constitutional Tribunal are final however court decisions can be appealed to the European Court of Justice in Strasbourg. Poland’s judicial system comprise of following entities. • The Supreme Court: It reviews the decisions of all lower courts; hears appeals of decisions made by the district courts, along with appeals brought by the minister of justice (who simultaneously serves as the prosecutor general) and the first chairman of the Supreme Court; and adopts legal interpretations and clarifications. • Lower Courts: it concentrates on minor, routine offenses.

Republic of Poland, 7 MBA 6100 • The Supreme Administrative Court: It review and standardize administrative regulations enforced by government agencies and to hear citizens' complaints concerning the legality of administrative decisions. • • The Constitutional Tribunal: It adjudicates the constitutionality of laws and regulations. The State Tribunal: It passes judgment on the guilt or innocence of the highest office holders in the land accused of violating the constitution and laws. • • The Prosecutor General: It safeguards law and order and ensure prosecution of crimes. The Commissioner for Citizens' Rights: It safeguard individual civil rights and liberties

Degree of Economic Freedom: Economic freedom can be defined as freedom to produce, trade, and consume any goods and services acquired without the use of force, fraud or theft. Political freedom can be defined as the right to vote, the right of free association and the right to free expression, enables individuals to determine who their rulers shall be and how they shall be ruled. As given in the table below, Poland is having 82nd rank in current list of degree of economic freedom published by Heritage foundation with 60.3 score of economic freedom. Within Europe region Poland is listed 35th out of 43 countries. Poland is listed relatively high on basis of monetary freedom and low on freedom from corruption. However freedom from corruption score is increasing. Overall degree of economic freedom is moderate.

Republic of Poland, 8 MBA 6100

Corruption and Bribery Index: Corruption is one of the major factors, which affects international business. It badly affects foreign direct investment. Poland is having 58th rank in year 2008 based on corruption index published by “Transparency International.

Year 2008 2007 2006 2005 2004

Rank 58 61 61 70 67

CPI Score 4.6 4.2 3.7 3.4 3.5

Surveys used 8 8 8 11 13

Confidence Range 4.0 – 5.2 3.6 – 4.9 3.2 – 4.4 3.0 – 3.9 3.1 – 3.9

Major Religions and Ethnic Groups:

Republic of Poland, 9 MBA 6100 Poland has been one of the world's most strongly Roman Catholic countries. Most recent figure shows that over 96% of 39 millions Poles are Roman Catholics. Before 2nd world war more than one third population was a non-polish ethnic group. However Polish government is successful in assimilating non-Polish ethnic groups. Germans, Ukrainians, and Belarusians are some of the ethnic groups exist in Poland. Following chart shows percentage distribution of ethnic groups in Poland.

Economy: Poland is considered to have one of the healthiest economies of the post-communist countries. Since the fall of the communist government in 1990, Poland has steadfastly pursued a policy of liberalizing the economy and today stands out as a successful example of the transition from a centrally planned economy to a primarily capitalistic market economy. Since 2004, EU membership and access to EU structural funds have provided a major boost to the economy. The Polish economy, with GDP growth of 3.2 % in 2005, and in 2006 is projected to reach 5.3%. In 2008, GDP grew an estimated 4.8%, based on rising private consumption, a jump in corporate investment, and EU funds inflows. GDP per capita is still much below the EU average, but is similar to that of the three Baltic States. The Polish economy is developing much faster than the Euro zone (1.3%) and more than the average of all 25 EU members (1.5%). Poland’s growth has been driven to a significant extent by export growth, industrial production and investments. Employment is also increasing. The best GDP growth rate per capita in the region is the highest in Poland. The privatization of small and medium state-owned companies and a liberal law on establishing new firms have allowed the development of an aggressive private sector. Poland has a large number of private farms in its agricultural sector, with the potential to become a leading producer of food in the European Union. Structural reforms in health care, education, the pension system, and state administration have resulted in larger-than-expected fiscal pressures. Poland

Republic of Poland, 10 MBA 6100 leads Central Europe in foreign investment. GDP growth had been strong and steady from 1993 to 2000 with only a short slowdown from 2001 to 2002. As of first half of 2009, Polish economy seems to be one of the least hit by the current global recession. In the first quarter of 2009, Polish GDP rose by 0.8%, which was one of the best results in the European Union. Although the Polish economy is currently undergoing economic development, there are many challenges ahead. The most notable task on the horizon is the preparation of the economy (through continuing deep structural reforms) to allow Poland to meet the strict economic criteria for entry into the European Single Currency (Euro). Poland is likely to join the European Exchange Rate Mechanism (ERM) in 2009 and adopt the euro in 2012 or 2013. In 2008 inflation reached 4.3%, more than the upper limit of the National Bank of Poland's target range, but has been falling due to global economic slowdown. Poland’s economic performance could improve further if the country addresses some of the remaining deficiencies in its business environment. An inefficient commercial court system, a rigid labor code, bureaucratic red tape, and persistent low-level corruption keep the private sector from performing up to its full potential.

Trade: As a member of the European Union, Poland’s mainform of business is in services (65.5%) with industry (31.7%) and agriculture (2.8%) as secondary forms of business. As of 2005 their exports versus imports numbers were fairly even. They export $92.72 billion USD listed in order of volume: manufactured goods and chemicals (57%), machinery and equipment (21%), food (12%), and mineral fuels (7%). Their volume of exports increased 8.4% in 2007. Also as of 2005, their imports were $95.67 billion USD listed in order of volume: manufactured goods and chemicals (43%), machinery and equipment (36%), mineral fuels (9%), food (8%).

Republic of Poland, 11 MBA 6100 Besides being an active member of the European Union since 2004, Poland is also a member of many trade organizations such as the World Trade Organization and the United Nations. Taxes as a part of trade are relatively similar to the structure in the United States and the European Union, except their corporate income tax rate seems to be much lower than ours at 15% average. They similarly have personal income taxes, value added taxes, local taxes, and excise duty taxes. The value added tax is higher than other countries at an average of 22%. This common tax and law structure makes foreign direct investment inviting. The country also has a 99% literacy rate and free education through university level, which equates to a welleducatedwork force, adding to the foreign direct investment possibility. No industry is closed to private enterprise and all companies incorporated in Poland are equal, no matter who owns them. The country encouragesforeign direct investment and the United States invested more money in Krakow, Poland than any other nation as of 2005. A few of the countries that have foreign direct investment in Poland are: Germany, USA, UK, France, and Israel. Poland is sited as one of Europe's crossroads between Germany and the Ukraine, as well as Scandinavia and the south continent. Poland made somewhat impressive rankings on the Globalization Index Ranking 2007 at www.foreignpolicy.com. As shown below, they compared well against the United States. A few rankings listed were: 1. Foreign Direct Investment: Rank = 46 out of 72, FDI as share of GDP, 2005 = 3.03% (USA was 69th with .90%) 2. Gross Domestic Production: Rank = 24 out of 72, GDP in USD = 303,161,000,000 (USA was #1) 3. Total Trade – goods, imports + goods exports + services, credits + services, debits: Rank = 38 out of 72, Total trade as share of GDP = 74.6% (USA was 71st with 26.2%)

Republic of Poland, 12 MBA 6100 Culture and Key Business Practices: Krakow, Poland as one of the biggest areas of foreign direct investment is Poland's cultural capital. Hardly a month passes in Krakow without a festival or ceremony; one example is the wild Lajkonik parade. The town is known as Poland’s gourmet Meccawith no shortage of places to drink and eat. The town is filled with museums, theaters and universities. “Krakow dwellers generally relish good company, good food, and having plenty of free time.” (www.krakow-info.com/lifestyle.htm) Religion plays an important part in Polish culture. Religious holidays are considered national holidays and most businesses are closed. Celebrations for Christmas last two and a half days. Catholicism is the largest religion with over 90% per capita membership. Along with religious importance is the importance of family in Poland. “One’s obligation is to the family first and foremost.” (www.kwintessential.co.uk/resources/global-etiquette/poland.html) It is no surprise then that honesty and relationship buildings arecornerstones in business practices in this country. The Polish value advanced university degrees and titles of achievement, when interacting in business and government. When doing business in Poland, plan to be direct in your speech, but take time to get to know your colleague and form a relationship. The better you know and trust your business partner the better your business dealings will go in Poland.

Resources

Climate. (2005). Experience Poland. Retrieved July 5, 2009, from

Republic of Poland, 13 MBA 6100 http://www.experiencepoland.com/climate.html Concise statistical yearbook of Poland. (2008). Central Statistical Office. Retrieved July 5, 2009, from http://www.stat.gov.pl/cps/rde/xbcr/gus/PUBL_maly_rocznik_statystyczny_2008.pdf General Information. Retrieved July 5, 2009, from http://www.staypoland.com/information-poland.htm Human Development Report 2007-2008. Retrieved July 6, from UNDP Web site: http://hdrstats.undp.org/en/indicators/1.html Human development report 2009.Retrieved July 6, from UNDP Web site: http://hdr.undp.org/en/reports/global/hdr2009/ Lodz Poland. Famous Why. Retrieved July 5, 2009, from http://regions.famouswhy.com/lodz/ Official promotional website of the Republic of Poland. Natural resources. Retrieved July 5, 2009, from http://www.poland.gov.pl/Natural,Resources,310.html Poland demographics profile. (2008). Retrieved July 6, 2009 from Indemundi Web site: http://indexmundi.com/poland/demographics_profile.html Poland geography. (2005). Retrieved July 5, 2009 from http://geography.about.com/library/cia/blcpoland.htm Poland lakes and rivers. Retrieved July 5, 2009, from http://www.mapsofworld.com/poland/tourism/lakes-rivers.html Poland population. (2005). Retrieved July 6, 2009, from http://www.studentsoftheworld.info/pageinfo_pays.php3?Pays=POL&Opt=population Poland population growth rate. (2008). Retrieved July 6, 2009 from Indemundi Web site: http://indexmundi.com/poland/population_growth_rate.html Poland unemployment rate. (2007) .Retrieved July 6, 2009 from Indemundi Web site:

Republic of Poland, 14 MBA 6100 http://www.indexmundi.com/poland/unemployment_rate.html Polish education statistics. Retrieved July 6, 2009, from NationMaster Web site: http://www.nationmaster.com/country/pl-poland/edu-education Thompson, S. Definition of population growth rate. Retrieved July 6, 2009 from http://www.ehow.com/about_5049974_definition-population-growth-rate.html U.S Department of State. Background Poland. Retrieved July 6, 2009, from http://www.state.gov/r/pa/ei/bgn/2875.htm Warsaw in brief. The official website of Warsaw. Retrieved July 5, 2009, from http://e-warsaw.pl/2/index.php?id=470